While The Motley Monk doesn't think much of Al Gore's fearmongering about global warming, The Motley Monk cannot deny that the former Vice President has been an extremely successful business man since he lost to President George W. Bush in 2000. According to Bloomberg, Gore's net worth tops $200M, which isn't chump change. In fact, it's nearly as much as 2012 GOP Presidential candidate Mitt Romney's net worth.
For the moment, overlook Gore's 2007 Nobel Peace Prize for "informing the world of the dangers posed by climate change" and that Gore is currently Chairman of The Climate Reality Project, a non-profit devoted to solving the climate crisis. Instead, focus upon the fact that Gore has proven himself to be a savvy investor. There may be something worthwhile to learn from him.
Co-founder and Chairman of Generation Investment Management as well as a senior partner at Kleiner Perkins, Gore believes that fossil fuels are almost as bad for a portfolio as they are for the planet. In an interview with Aaron Task of Yahoo! News, Gore warns:
We have a carbon bubble. Bubbles by definition involve a lot of asset
owners and investors who don't see what in retrospect becomes
blindingly obvious. And this carbon bubble is going to burst.
There are $7T in carbon assets--oil and gas reserves controlled by publicly traded energy--on the books of multinational energy corporations. Gore believes these carbon assets are today's equivalent of subprime mortgages. They have "absurd valuations" that are based on a "self-serving allusion" that the carbon-based energy sector is sustainable in the long-term. Gore notes:
The valuation of those companies and their assets is now based
on the assumption that all of those carbon assets will be sold and
burned. They are not going to be burned. They cannot be burned
and will not be burned. No more than one-third can ever possibly
be burned without destroying the future.
If Gore is correct, there's lots of short-term money to be made by playing the psychology of the markets. But, for the long term, investors must take into account the stranded-assets potential for carbon-based equities and debt instruments. The failure to do so, Gore says, is a mistake.
In The Motley Monk's estimation, the problem with Al Gore's analysis--as well as his fearmongering about global warming--is that carbon assets are going to fuel energy consumption for the foreseeable future (meaning several if not many decades). Even if sustainable energy becomes increasingly affordable during those decades, until it does, those carbon-based equities will continue appreciating for investors. And that's to say nothing of the very handsome dividends many of them are currently paying out to savvy investors.
Let the discussion begin...
To read Aaron Task's article and to view his interview of Al God in Yahoo! Finance, click on the following link: