by Jim Speiser, Special to the Roundup
As a full-time investor and trader, I’ve learned to be agnostic about ideology. Not that I don’t have one, on the contrary, I’m passionate about my opinions.
But when it comes to markets, you’re dealing with everyone’s opinions. Markets move with greed, fear and changing events. And there’s the rub. Things are always changing — kind of like the weather. Just when you’re getting used to a nice sunny streak, it turns unbearably hot. And when it cools down, it rains ... and rains. Trying to get a handle on the markets is like trying to get a handle on the weather.
As an investor I face the ravages of inflation, recessions, bank crises, real estate and stock market crashes, and geopolitical events. Yet through all of these crises, I’ve learned how to live and profit through the worst of these events. But is it possible to profit from what has been an obvious change in the weather from relatively mild seasons to the severe weather events we’ve been living through lately?
Just as it is possible to protect ourselves against things like inflation, bank runs, and market crashes, I submit it’s possible to protect ourselves, at least financially, against things like drought, famine, earthquakes, hurricanes and the like.
I’m not suggesting we can avoid the terrible effects of these events, just as we can’t avoid the effects of things like the financial crisis we just lived through, or a real estate collapse, or a really bad recession. But we can alleviate the pain to a degree.
If you lose your house to a hurricane, at least you know that good insurance will make you whole again. And if you have invested wisely, you could see your life savings increase rather than decrease.
As a trader of stocks, I thrive on change. For that reason “climate change” fits right into my way of investing.
I’m a defensive investor. I reduce the risks of loss and increase my chances of making money through foresight. Warren Buffett does the same thing. He only invests in what he knows and can rely on to make him a decent profit over the long term. His investments and portfolio are built to stand any kind of weather.
Buffett may be a great place to start in building a portfolio of protection, since the cornerstone of his Berkshire Hathaway empire is insurance companies. Buffett knows, owns and trusts insurance companies, and if the unexpected ever happens to cause great environmental damage he knows that more and more Americans will run to acquire insurance. In today’s world of increasing severe weather events, his stock continues to rise. It should be a mainstay in any defensive portfolio.
Caterpillar and Deere, two companies that supply heavy equipment, provide everything needed to repair infrastructure damages due to severe weather. They also provide the equipment to mining companies to mine commodities like copper, zinc and aluminum that go into repairing the infrastructure — the roads, bridges and buildings we all need and use. In addition, these two companies provide agricultural equipment. Monsanto is another blue chip company in the agriculture business and should be considered in such a portfolio.
Concerning drought, you can invest in ETFs that own entire industries or sectors to deal with shortages, such as DBA, an agriculture ETF. And if you are interested in clean energy, there’s an abundance of investment opportunities, including:
• PowerShares WilderHill Progressive Energy Portfolio (ARCA:PUW)
• PowerShares Water Resources Portfolio (ARCA:PHO)
• PowerShares Global Clean Energy Portfolio (ARCA:PBD)
• PowerShares Global Water Portfolio (ARCA:PIO)
• PowerShares CleanTech Portfolio (ARCA:PZD)
• Market Vectors Global Alternative Energy ETF (ARCA:GEX)
• Market Vectors Environmental Services Index (ARCA:EVX)
• Market Vectors Nuclear Energy ETF (ARCA:NLR)
• First Trust ISE Water Index Fund (ARCA:FIW)
• First Trust Nasdaq Clean Edge Green Energy Index Fund (Nasdaq:QCLN)
• Claymore S&P Global Water Index ETF (ARCA:CGW)
And let’s not forget the ultimate protection against catastrophe: gold. Gold will protect you against commodity inflation if food or gas prices soar. It will rise in value in times of chaos. And gold can be used as money if banks close and ATMs run out of cash. Unlike investments in corporate stocks, gold should be held physically in your possession in small denominated coins. Silver coins should supplement gold holdings.
There’s no way to know which weather events will affect us or when, but it’s certain that they will. Investing in those companies that will have to clean up after such events is a sure way to profit from climate change. And owning scarce resources and commodities in various forms is an insurance policy above and beyond the everyday casualty insurance everyone needs to protect themselves against the ravages of nature.
Jim Speiser is a retired talent agency executive who has turned his attention to climate change. He has lived in Payson with his wife Mary since 2004.