The Paris Climate Accord and Your Portfolio | The Mesh Report

The Paris Climate Accord and Your Portfolio

John Thomas June 6, 2017 Comments Off on The Paris Climate Accord and Your Portfolio

Donald Trump’s abrogation of the Paris Climate Treaty was the most predictable event of 2017.

Our new president always makes the decision that is most controversial and most likely to generate outrage.

That is how he ran his last business, a reality TV show. Anything that generates traffic is good for business.

I know this is true because I happen to run a globally distributed financial newsletter and Trade Alert Service where the same sensational economics apply.

Trump also desperately needed anything that would divert pubic attention from the Russia investigation, which are stonewalling his economic plans and are expanding by the day.

Look for markets to go catatonic going into former FBI chief James Comey’s Russia testimony in front of congress, and then ratchet wildly afterwards.

I have to tell you that I was grateful that Trump dumped the climate treaty for many reasons.

For a start, it allowed me to ignore all media for 48 hours, thus allowing be to concentrate on the more important things in life, like how much US corporate earnings will increase during the current quarter.

I can do this because I am already certain about the impact of the Paris Climate Accord on your investment portfolio, and that would be absolutely zero.

The Treaty agreed to among 195 nations, which took 20 years to negotiate, was at best nothing more than an expression of good intentions.

Enforcement actions were virtually nil.

Of course, the largest burden had to fall on the shoulders of the United States, which with 25% of the world’s GDP, generates far and away the greatest share of carbon emissions.

Neophytes to the field will also ask why other countries got such a great deal with their deadlines.

That because poor countries, like China, with a per capita income of $6,000 a year, and Brazil, with a per capita income of $8,700, were given extra years to comply compared to the US, with a per capita income of $51,000.

America and industrialized Western Europe had the great fortune to build modern economies before the environment became a hot button issue.

But the climate issue goes much further than that.

Most large US companies investing tens of billions of dollars are slaves to investment horizons of five, 10, 20, or even 30 years. They account for the overwhelming bulk of capital investment in this country.

When Exxon (XOM) drills an oil well, it could potentially be reliant on that well to generate income until 2057.

General Motors (GM) has to gamble that a new car factory will be used for just as long.

The Paris Treaty carried a three-year notice period for departures.

If the administration gives notice today, it is still obligated to comply with the treaty terms until 2020 when, guess what? We have another presidential election.

Even without the Treaty, the overwhelming majority of American companies will continue with pro climate carbon reducing policies.

The reason is simple: profits.

Carbon reduction is where the money will be made in coming decades.

You will see this is the production of new alternative technologies that are profitable on a non subsidizes basis and can be sold world wide.

Moving towards free energy will also eliminate the second largest cost for most industries, after labor.

There is another factor at work here.

The most important statistic of last week was NOT the May Nonfarm Payroll Report of 119,000 new jobs.

It wasn’t the Q1 GDP Report that was revised up from 0.8% to 1.2%.

It wasn’t even the hundreds of thousands of tons of carbon the Paris Treaty is removing from the environment.

It was the Baker Hughes US Rig Count, which rose by eight wells to 908. That is nearing triple the 305 wells we saw at the 2016 bottom.

This means that there is an onslaught of new natural gas (UNG) supplies about to hit the market.

This alone will reduce US emissions further, as burning gas produces half the carbon of traditional oil fired power plants.

It will also further demolish the coal industry, which will be hopelessly unable to compete with natural gas under $3/BTU, no mater how many labor and pollution regulations are rolled back.

A coal-fired power plant will never again be built in the US. This is why coal’s share of US power generation has fallen from 50% to 30.4% since 2010.

It is the most rapid change in America’s energy makeup since petroleum entered the picture 100 years ago, and it is all happening purely because of economics, as it should.

By the way, did I mention that I am watching the Van Eck Vectors (KOL) ETF as a potential short selling candidate, which is up 190% from the 2016 low, all on hopes for the great things Trump is going to do for their troubled industry?

Now let me tell you the most important statistic of the decade.

On several days this year, alternatives accounted for more than 100% of the power generated in the state of California.

Thus, the country’s largest consumer of power overnight becomes a net producer.

The original target for this goal was 2050.

That surprise development drove the wholesale price of electricity in the Golden State down to ZERO!

In order words, energy became FREE.

And if energy is occasionally free now, it will become permanently free within two decades.

And it is free now in California, it will become free where you live in 10-15 years.

Yes, this alternatives thing is happening much, much faster than even the most wildly optimistic analysts (me) expected.

Corporate profits everywhere will skyrocket, and the impact on your personal investment or retirement portfolio will be spectacular.

For more details on the Paris Climate Treaty, please click here for the United Nations website.

What will Trump’s next outrage and traffic generating political move be?

He will fire Federal Reserve Chairman Janet Yellen, whose term is up in 2018.

Not because she has done a poor job, but because he CAN.

And as any Marine will tell you, being predictable is a very dangerous place to be.

And if Q2 corporate profits don’t tickle you fancy, you can always watch the NBA Finals, where the hometown Golden State Warriors are beating the despised Cleveland Cavaliers two games to zero in one of the greatest grudge matches of all time.


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