Monday, August 02, 2010

Can't see the forest for the trees

I couldn't decide what to entitle this post, but ultimately settled on the above caption. Leading contenders were ... Looking backwards doesn't help you going forward ... Driving by the rear view mirror a recipe for disaster ... I'm a tree hater ...

Anyway, the theme here is trees and thinking about the future ... I've recently read many articles suggesting forest land has historically been a good investment, and is a good hedge against inflation. The fact that big institutions like Harvard and various hedgies like it, obviously isn't too bad for leading the "me too" crowd to think it might be a good investment. I have to say though, that trees scare the crap out of me.

With global warming accelerating, as anyone who lives in a moderately dry forest belt can tell you, the idea that you can get a reliable return from forest land/trees is an open question in my mind. As I have watched our summer "weather" grow to include a period of smoke haze for one or two weeks, from fires near and far, I have to tell you I don't think the prospects are promising. If invested in a single specific company, you could well see your total investment wiped out or severely impaired by a major forest fire; the number and severity of fires seems to be rising rapidly. The open question relating to risk/reward in my mind is this:

  • Will the increased prices for the remaining trees be sufficient to offset the obvious forest wipe-outs that are going to occur?
I am doubtful that sufficient price escalation will occur (or if it does, it'll be so high that it will foster the production of substitute products) and is contrasted against the possibility of severe value impairment on any particular specific forest asset as it burns down. In my mind, on a go-forward globally-warmed planet, I can't think this is an investment I want any part of, at this time.

However, if you are only thinking about the past, driving by the rear view mirror as it were, then you would be likely to miss the impact that global warming might have on such an investment.

NEWS FLASH: Russia is dealing with its' hottest recorded summer temperatures, and one-quarter of a million people have now been deployed to fight forest and peat fires.

As a side-bar note, I get tired of dealing with dum-dums who, for reasons of mental and emotional convenience, want to continue denying global warming. The comment forum is open as always, but if you disagree with what real, professional climate scientists say, please take it up directly with them. If you have a stunning piece of scientific evidence that disproves one side or the other, don't waste time on my channel, write a paper, and get it peer-reviewed and published in a reputable journal.

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JW The Confused Capitalist

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