Category: Articles

There is an investment thesis here. We just need the backround first.

“Davidson” submits:

You may wonder why I have sent you something about sunspots.

I do so because with my background, BA Geology, PhD Physical Organic Chemistry and MBA Finance, I am always looking for those threads of information that will help us make better decisions. Even something that looks off the beaten path can be eye opening such as this piece I found in Don Coxe’s recent commentary. Don’s full commentary is attached.

Don is a macro thinker and provides his views on the appropriate investments. I do not do this, but prefer to use the best investment managers I can locate and let the managers handle the details on individual security selection. My goal is to balance them in an allocated portfolio and then monitor and rebalance the portfolio vs. the asset class Return/Risk relationships.

I think Don is right to consider this information as part of the investment discussion even though its impact on our future is not clear. What may be an obvious play on energy could easily be translated into discoveries yet unknowable and result in new investment directions. Julian Simon discussed the power of human intellect in his “The Ultimate Resource 2” in solving seemingly insurmountable problems.

What is clear to me is that the current mania regarding global warming does not have science on its side and that any massive climate initiative should be approached with greater study. Having a scientific background leads me to look for cause and effect. I do this in investing and providing direction to clients. Often I find that stepping back a few more feet to view the wider picture proves illuminating. I think Coxe’s focus on sunspots and the known connection to global temperature cycles is well worth reading.

The source for all charts is the web site: http://www.swpc.noaa.gov/index.html I added the chart for sunspot activity history from 1845-Present to provide you with perspective.

Don Coxe’s Section on Global Cooling:

Since we last published, the sunspots have been scarce and small, and the most respected measures of global climate show a strong cooling trend in this decade.

(The projections for future sunspot activity are from the two best-known sunspot research centres. For two years, they have been moving them forward as the sunspots disappoint the astronomers by failing to return.)

As clients know, we use our study of history to compare popular views about economics, finance, geopolitics with evidence of what has happened in previous eras.

As all scientific studies have shown, since the early 19th Century, the world has warmed up. Previously, the world went through roughly two centuries of serious global cooling. Whether by coincidence or not, sunspot activity during those centuries was extremely low.

Outside the Tropics, the world was cold. Example: Scotland suffered six straight crop failures during the 1690s because of late Springs and early frosts. Some historians believe this was the major reason why the Scots gave up their dreams of independence and joined England. There were skating parties on the Thames each winter. Polar ice caps expanded dramatically.

Then, in the early 19th Century, the sunspots returned. The pattern: ten years of sunspot activity, a year of rest, then a new cycle.

The last sunspot cycle ended on schedule in 2006. Also on schedule, there was minimal or no sunspot activity in 2007. Not to worry, said the global warmists: they’ll be back next year.

They didn’t come back in 2008. They haven’t returned so far this year. In retrospect, the record-breaking day-long super-spectacular series of 174 sunspot explosions on Bastille Day in July 2001 was the equivalent of Gandalf’s fi reworks display for Bilbo Baggins’s 111th birthday, which ended Bilbo’s ownership of the Ring. Astronomers still speak with awe of the sunspots that day. Satellite and radio communications across the world were devastated, and the Aurora Borealis was seen as far south as Texas. Almost immediately, sunspot activity began to dwindle, and then the spots completely disappeared in 2007. Periods of high sunspot activity didn’t reach the levels seen in the 1980s and 1990s. Minimums were lower. Then the sunspots virtually disappeared.

They haven’t come back, which means we are experiencing the longest sunspot drought in more than two centuries. As NASA notes, solar wind activity is at a fifty-year low. As other astronomers have noted, that decline in solar wind could be the factor that has dramatically reduced the depth of our atmosphere. Earth has had, for most of the time that we could measure such things, 400 miles of atmosphere between ground level and the Absolute Zero temperatures of outer space. We’re down to 250 miles.

As the science writer of the Telegraph put it, we are 150 miles closer to outer space than we were at the dawn of the Space Age.

As clients are well aware, we are infl uenced by the work of astronomers dating back to the Astronomer Royal, William Herschel, who two centuries ago demonstrated a correlation between the price of corn (wheat), and changes in sunspot activity. So we have watched with growing interest as astronomers report surprise at the failure of the sunspots to return.

The Victorian scientists would have swiftly said that the two cold winters we have been experiencing were inevitable, given the collapse in sunspot activity. There hasn’t been such sustained spotlessness on the sun for so long that it seems that the global warmists came to believe that those earlier Minimums were freakish occurrences.

Historians learn to take history as it is reported, and not to impose their own prejudices on it. We believe it highly likely that the temperate zones of the world—where most people and most grains come from—will experience notably cooler weather this year, which could imperil key crops.

Last year, according to some preliminary climatological surveys, the world temperature fell one degree Fahrenheit, the biggest one-drop for which we have authoritative records apart from the short-term cooling after Mount Pinatubo erupted in 1991.

That temperature decline seems to have continued through winter, which has been severe in many regions. It is, as of now, the 10th coldest in Chicago’s history.

Snow has been reported as far south as Malibu. The Pacific Northwest—including Seattle, Vancouver and Victoria—has suffered the kind of snow and ice storms that more resemble New England than the balmy Pacific Coast. London had one of its biggest snowstorms in decades. Louisiana had a severe snowstorm in December that closed the major bridge across the Mississippi, backing up traffic for miles in either direction.

The University of Illinois Climate Research Centre, which researches ice caps and sea ice in the polar regions (“The Chryosphere”), has for years been reporting on the shrinkage of sea ice. When they took their annual year-end portraits of the poles, they were amazed: In just four months, the sea ice had expanded dramatically, and the total ice was now back to the average level of the past thirty years.

But, (you may say), I’ve read the reports on the Arctic ice cap shrinkage and I know that we face a crisis. One of the best-known reports is published by the US National Snow and Ice Data Center, whose work was influential in the move to declare polar bears an endangered species. The Institute kept reporting this year that the ice was still disappearing, and its reports kept getting printed.

The Page 16 story came in mid-February when the Institute had to confess that “sensor problems” had given some misleading readings. In fact, they had managed to miss 193,000 square miles of sea ice, an area 18% larger than California.

Our take on all this is that the global warmists have such control over the universities, politics and media, that discussion of the possibility of a new period of global cooling is treated as something between hysteria and voodoo. Therefore, farmers and agricultural planners are making no provision for the possibility that this growing season could be far more challenging than last year. And, based on the historical evidence, cooling is cumulative: if the spots don’t return, next year is likely to be more problematic for farmers than this year.

’Twas ever thus. Our knowledge of sunspots dates back to Galileo and the records of sunspots have been kept since his time. He wasn’t permitted by the Elites of his time to say publicly that the earth revolved around the sun. The Vatican no longer claims that kind of authority, but the Scientific Left (if that is not an oxymoron) does.

One of Galileo’s contemporaries, Montaigne, expressed his exasperation about the way science was treated. “We parrot whatever opinions are commonly held, accepting them as truths, with all the paraphernalia of supporting arguments and proofs, as thought they were something firm and solid…Thus the world is pickled in stupidity and brimming over with lies.” That could describe today’s situation whenever the subject of global warming is discussed publicly.

This could be the ultimate Page 16 story.

On the other hand, it may be, as Henry Ford so vociferously maintained, that

“History is bunk.”

Full Report:
Donald Coxe BMO Basic Points 3 2009

Investment recommendations on page 41 of report…

Disclosure (“none” means no position):