Could 2020 get any worse?
First the coronavirus, then the recession and on top of that enough political ads on TV to make it unwatchable. But the punches keep coming. The pièce de résistance of the year is the destruction of California’s vineyards.
(live shot of Landsberg Bennett employees fretting over the upcoming lack of wine)
While we mourn the results of what maybe the worst year since 1970 (the birth of disco and yours truly) as investors we view the ever-changing landscape as opportunity.
Let’s use the destruction of some of California’s vineyards as a guide.
Whether or not you believe climate change is a real issue, or how much of the change is caused by humans, the string of wildfires, hurricanes, and floods we have seen over the last few years demonstrate something.
The rules of the game in many sectors of the economy are changing and changing fast. Buying vineyards with older and productive grapes used to be a sure thing. Now, you could lose your crops because someone had a gender reveal party.
For planters it’s getting harder and harder just to buy insurance on the properties. Insurers faced with growing liabilities are finding it harder to buy reinsurance on excess damage across the country.
Because of high winds (and company mismanagement) there are rolling brownouts in California. Companies selling generators have hit the jackpot, the utilities companies not so much.
But, if the world goes all-in on sustainability too suddenly, there’s also a danger that the “transition risk” caused by new regulations or widespread shifts in energy use could also hurt markets or specific sectors of the economy.
Well, what’s the good news?
There’s always hope. Many of the worst effects of climate change will play out over years and decades, not weeks and months.
There’s time for people, businesses, and governments to adapt. And humans have proven to be infinitely adaptable.
And there’s hope that the worst-case scenarios about a hotter world might not come to pass. I remember seeing articles in the Washington Post and Chicago Tribune in the 1970s warning of a possible Ice Age. We didn’t have that (but sadly, we did have disco).
I believe that optimism and pessimism can (and often should) co-exist.
I’m pessimistic about the climate path we’re on.
I’m optimistic that we will make the changes needed to get on the right path and steer away from the worst effects of climate change.
As your wealth management firm, we are also staying on top of the growing body of risk models and research to help our clients chart a path through an increasingly uncertain world.
Sitting back and thinking this is not going to have long term effects (both positive and negative) on investments is not realistic. We are trying to identify potential winners to invest in (or keep investing in) and some losers that we want to avoid.
Often, successful investing is more about avoiding losers than it is about merely picking winners.
As always, thank you for the trust and confidence you show in our firm and Stay Safe.