Larry Berman: Bullish on green investing, bearish on carbon tax
On this April Fools' Day it's no joke that carbon taxes are here Canada. They won't work at all, they will just make life more expensive. Read what Bill Gates is doing about it. Science will solve the climate challenge, it's clear where investments need to be made. I’m bullish on his software and I’m bullish on his philanthropy.
I rally against carbon taxes because they simply won’t work. The economic model says tax the things you want less of. But a necessity like driving to work and heating your home are not really substitutable for most, and that’s where the ideology fails. It you want to stop behaviour, the tax needs to be punitive. Think a pack of smokes for $100 versus $100 for a carton. Today, taxes rise on those too $4 a carton. So how many more people cannot afford to smoke? Right, not any. And smoking kills, we all know it. We cannot debate it, though some do.
Today in Ontario and other provinces, the carbon tax increased the price of 1 litre of regular unleaded gas 4.5 cents per litre. No one is going to drive less at all. And the plan is to keep raising that tax for several more years. Still, another 15-20 cents per litre is only going to serve to subtract from other discretionary spending. In other words, poof, your hard earned income is literally up in smoke.
If you want to stop something, it needs to be punitive. How many people could not afford to drive at double or triple the price per litre. The economic damage that will do is catastrophic. But the rebates will make it neutral they say. If that is true, which I doubt, then all that does is put prices higher because we will have the money to pay for it . It will not curb uses one iota.
People like Bill Gates and others investing in real scientific ideas to move the needle are where governments need to invest in my humble opinion.
"...When soil gets disturbed — like it does when you convert a forest into cropland — all that stored carbon gets released into the atmosphere as carbon dioxide. That’s one reason why deforestation alone is responsible for 11 per cent of all global greenhouse gas emissions. (Another reason is that forests and grasslands are natural carbon sinks. Clearing them reduces the planet’s capacity to remove carbon dioxide from the air.)
The microbes in soil can also create greenhouse gases when they come into contact with fertilizer. Synthetic fertilizers revolutionized how we feed the world, but they release a powerful greenhouse gas called nitrous oxide when broken down by those microbes. Natural fertilizers like manure aren’t any better, because they release greenhouse gases as they decompose.
Microscopic nitrogen factories that replace fertilizer: What if we could fertilize plants without releasing so much harmful nitrous oxide into the air? BEV is invested in a company called Pivot Bio that has genetically modified microbes to provide plants with the nitrogen they need without the excess greenhouse gases that synthetic alternatives produce.
So how do we fight climate change caused by agriculture? We can’t simply get rid of soil — or stop growing crops, using fertilizer, and raising livestock. There are some changes that societies can make — people in level 3 and 4 countries will eat more meat as they move up the income ladder, so people in level three and four countries could consume less to compensate, for example — but at the end of the day, people need to eat.
That’s why the goal with agriculture is not to reduce the amount created, but to reduce emissions per product."
If we apply this thinking to vehicle emissions or energy creation, the two of the largest emitters, we see that taxes won’t work as I’ve described because we have to drive and eat and if you make it unaffordable, that is a bad plan. We need to invest in science and technology. That’s really the only way to do it.
From an investment standpoint, investing in Clean Energy or Traditional Energy for the past decade has been brutal to put it mildly. I think we all would like a clean planet and would all like to do our part. Let’s encourage government to invest in science and technology like Bill Gates really putting in an effort to move the needle. Carbon tax is a sad joke that will not work, let’s invest in smart solutions.
Learn to Sleep at Night in a Bear Market
The previous Investor’s Guide to Thriving tour wrapped up on December 1, 2018. Aptly named “How Long Can a Bull Market Run?” we may have received our answer. The market printed the worst December since the Great Depression – bringing most of the major indices officially into bear market (-20 per cent+) territory. Markets have rebounded in January as they always do after steep declines, but we are likely in the early phases of a bear market where average corrections are closer to 30 per centand extreme corrections are more than 50 per cent. If this is case, we haven’t seen the last of market volatility and a downward pattern of lower highs and lower lows. Many people are surprised at this phase because it can take some time for the fallout to move from Wall Street to Main Street – showing up as a recession. Job markets are relative robust still and Central Banks are still talking about raising rates. Markets are forward looking and generally anticipate economic downturns, so even as rates continue to rise, employment appears to be strong, and many companies are still posting record earnings – you should be paying attention to the growing cracks in the system.
Larry will take the audience on a more detailed tour of past bear markets to see what we can learn about how this next one might compare. Will it be a gentle panda or a deadly grizzly? Can we hope for a soft landing due to aggressive government policy? How would we recognize a market bottom – when the next major bull market might begin? Why not go to cash or put all your money into a GIC right now? There are many questions to ask – and while (spoiler alert) we don’t have a crystal ball to give you the definitive answers, Larry can show you how to navigate a bear market so that you will use it as an opportunity rather than something to fear. Using some of his favorite indicators and techniques, you will learn how to use a tactical approach to trading, and strategic asset allocation (including the use of gold, real assets, and other non-equity vehicles), to help keep your portfolio within your emotional comfort zone – while avoiding costly emotional mistakes. Success in difficult markets is both a science and an art, so Larry will also discuss the psychological aspect of managing portfolios under stressful conditions.
You will take away from this live presentation a timely perspective on how to approach your investments in 2019 and beyond – along with actionable ideas to help strengthen your portfolio, and even a few tools and resources to use at home. Sign up at www.etfcm.com
Come out to one of our remaining Berman’s Call events and learn how to take advantage of active asset allocation.
SEE LARRY LIVE
|Montreal, Que.||Thu. April 11|
|Ottawa, Ont.||Sat. April 13|
|Edmonton, Alta.||Wed. April 24|
|Calgary, Alta.||Sat. April 27|
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