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Inflation Myths and the US Economic Rebound in 2021

On May 12, 2021, the US Labor Department released its report on businesses now raising prices, as the US economy reopens in the wake of Covid vaccinations and moderating Covid infections. The CPI, or Consumer Price Index, rose 0.8% in April, after a 0.6% in March, and 4.2% for the twelve months ending last month, April 2021, which was the largest increase since 2008.

Republicans, conservatives, and business interests are erroneously using the fact of recent rising prices to attack legislative proposals to increase government spending. They argue the recently passed $1.8 trillion ‘American Rescue Plan’ (Covid Relief Plan) by the Biden administration was too generous. And proposals to spend on Infrastructure ($2.2T) and American Families ($1.5T) will only stoke consumer spending and boost inflation further.

They and their drama mainstream media friends are arguing that fiscal stimulus putting money in the hands of households is driving up prices. In other words, consumer DEMAND is now causing prices to rise sharply, they falsely argue.

In fact, the problem of rising inflation is actually a business SUPPLY problem!

Inflation Not Due to Fiscal Spending & Household Demand

There is little evidence that fiscal stimulus spending is responsible for recent price hikes. The fiscal stimulus spending for 2021 is far less than reported, so its effect on household Demand spending—and therefore Inflation—is thus far minimal.

The recently passed American Rescue Plan is not actually $1.9T, as media reports.  The Congressional Budget Office, the research arm of Congress, reports that only $1 trillion in spending is even authorized for 2021. And of that, at least $200 billion or more won’t be spent in fact: it will be hoarded and unspent by households and local governments or used to pay down debt and won’t get into the US economy in 2021. The majority of the remaining $800 billion hasn’t even hit the US economy yet and won’t until late 2021.

And what about the Infrastructure and Family Assistance subsequent proposals? They’re just on paper; And won’t get passed until sometime in 2022, if then, and certainly reduced in authorized spending by large amounts. In short, the Republican-Business hype about $6 trillion going to households and consumers is just another ‘big lie’.

It’s no more than $800 billion—that is, just about the amount of similar fiscal spending in 2020 that dissipated in just two to three months. Put another way, the fiscal ‘stimulus’ is not really a stimulus—just a ‘mitigation’ spending measure designed to put a floor under the economy while waiting (and hoping) for the reopening of the economy to generate a sustained recovery.

A fiscal spending of at most $800 billion this year—which has hardly even hit the US economy yet—is not sufficient to generate excess demand by households to cause inflation. So much, therefore, for the argument that government fiscal spending is causing excess household DEMAND spending that is resulting in current inflation!

Inflation Due to Business Supply Problems

A closer look at the CPI shows that the problem of recent rising prices is a SUPPLY problem in business, not a DEMAND problem due to households’ excess income.

Much of the recent CPI increase, when broken down, is due to sharp increases in auto prices, especially used cars. That is a supply problem: auto companies are experiencing a crisis in obtaining semiconductor chips for production. New car production has fallen. That’s created a shortage that allows the companies to jack up prices on their new cars. In turn, it has resulted in used car prices rising even further and faster than new cars.

Symbiotically, new car prices have surged 9.6% and used cars even more, by 16.7%, according to the Wall St. Journal.  Auto prices overall have surged 21% during the past year. April’s car and truck double digit price hikes—the highest since 1953—thus account for more than a third of the overall 4.2% April CPI increase!

The 2020 economic contraction actually resulted in businesses deeply reducing their inventories of unsold goods. They now have shortages. Recent US GDP numbers show inventories collapsed last year and continued to contract in the first quarter of 2021 as well. This has created a condition that now allows businesses to sharply raise prices due to the shortages of supply. This is a condition and problem across many industries and companies today.

Businesses in 2020 were not able to raise prices due to the massive unemployment and inability of consumers to spend as the economy was largely shut down.  Service industries like airlines, travel, lodging, entertainment, restaurants & bars, and retail were especially hard hit. In response, many of the companies in these industries cut prices in order to try to capture what little household demand there was.  Now, as the US economy reopens, they are trying to recoup those losses by sharply raising prices, trying to test what the market will bear in terms of inflation.

Looking at the recent CPI numbers once again, apart from auto prices new and used, the sharpest increases in the CPI index are occurring in airline prices, other travel related prices, hotels and lodging, and similar services—all rising recently at more than 10%!

At the same time, auto insurance companies and utility companies are raising prices by double digits as they price gouge consumers in the recovery. Consumers aren’t buying more utilities. That demand remains stable. Nevertheless, the big utility companies are using the opportunity to boost prices. The auto insurance companies experienced a big windfall in profits in 2020, as households drove less and their insurance premiums remained at pre-pandemic levels. But now they too are raising prices by double digits to ‘game’ the system. Then there’s the oil companies sharply boosting prices at the pump to recoup their losses in 2020.

Not to be left out, in addition to these supply driven causes, new housing prices are surging as well as shortages in lumber and other materials, and due to the low availability of housing stock. In other words, a SUPPLY problem is really causing inflation!

Global Markets As Cause of Inflation

Wholesale prices for commodities like aluminum, copper, and crude oil are all rising sharply as well, as investor speculators buy up futures contracts to resell later at a big profit. These now rising wholesale prices will soon penetrate consumer prices, causing retail price inflation. But that means the problem once again is not the household consumer and demand; it is largely the professional financial speculator causing most of the current rising world commodity price inflation.

And then there’s the problem of the weakening US dollar, which drives up the cost of imported goods prices (in the CPI), which has nothing to do with household demand either.  The Federal Reserve US central bank has a policy of keeping interest rates at near zero.  It has pumped more than $4 trillion into banks the past 18 months; and continues to provide $120 billion every month to ensure rates stay low. This policy and subsidization of low interest rates has resulted in less foreign investor demand for US dollars to buy US Treasury bonds that pay little interest. That reduced demand for dollars drives down the value of the US dollar. And that lower valued dollar in turn, raises the cost and price of imported goods coming to the US. Import prices of goods in the CPI therefore rise in turn and contribute to the general increase in the CPI.

In short, the falling dollar is a cause of inflation that has nothing at all to do with excess household demand for goods due to fiscal spending.

Problems with the Consumer Price Index (CPI) as an Indicator of Inflation

How reliable is the CPI, in general, and especially as a measure of economy-wide inflation?

The answer is not very.  There are major problems with the CPI as an accurate indicator of the price level—i.e. of inflation. Here’s just some of them:

First, the CPI is not even an indicator of the general price level and inflation, as economists well know. It is an indicator of the cost of living for urban households only.  Cost of living and inflation/price level are not the same thing,  contrary to the general public’s understanding of the two concepts.

The CPI measures only around 450 different ‘goods and services’ in the economy—i.e. the most purchased by urban households. There are millions of different goods and services in the US economy with prices, none of which are included in the CPI but are part of the general price level.

Second, unknown by the general public, the US government keeps secret how it calculates most of the CPI. Why so? It says it does that in order not to reveal how businesses raise prices because it would reduce competition among businesses. But that’s nonsense. Most businesses, especially the larger corporations, know full well how their competitors raise prices.

The US government reveals more detail about how it calculates employment and unemployment, but keeps secret most of its methods secret how it manipulates CPI raw data. It does that, in my opinion, in order to ‘low-ball’ inflation. It has an incentive to under-estimate the CPI. The higher the inflation, the more the government must spend in cost of living for social security, food stamps, school lunches, government pensions, and so forth. So it prefers to low ball inflation and does so in a number of way. Unlike employment stats, it also avoids segmenting inflation by race, age, gender, and income levels. That would show how CPI inflation more seriously impacts minority and low income households.

Third, the CPI measures the increase in inflation compared to a similar month or quarter in the previous year. So if prices were falling last spring 2020 due to the severe economic contraction, prices this spring 2021 appear especially high.  Businesses are recouping price cuts (deflation) last year, so price increases appear even higher this year. In other words, it matters what ‘base year’ is used to estimate the CPI (or any inflation index for that matter). The CPI can be either higher or lower depending on what base year is used. And if the base year was deflationary, with falling prices as was 2020, then the subsequent year, 2021, inflation and CPI appear exceptionally higher than otherwise.

Apart from the CPI not being an actual measure of the general price level and its methods for estimating inflation kept a secret, there are further problems with the CPI itself. Here’s just a few:

1) The CPI’s basket of 450 or so goods and services have weights assigned for the various goods and services. In other words, the cost of lodging weighs more in the final CPI calculation than does, for example, the cost of smart phones. But the weights are changed only every 4 or 5 years. The cost of food, autos or housing may surge significantly in any given year (now occurring) but their weights are not changed to reflect the increase. The CPI is thus under-estimated for that year. Moreover, the weights are not segmented by household income levels. So for the median or even more for the working poor households, the cost of rents result in an even greater inflation effect than for, say, wealthier households. The poor are impacted by inflation more as a result. Their CPI cost of living is thus much higher than the general CPI number;

 

2) The CPI makes adjustments for rising quality of goods. For example, even though the cost of a new iphone may be higher this year for the buyer, because the new iphone has more features and functions, the government calculates a zero rise in price or even a price deduction for smartphones in its overall CPI calculation. The buyer-consumer may experience an actual price hike, but it doesn’t show up in the CPI as such;

 

3) There’s also what’s called the ‘substitution bias’ problem in the CPI.  This happens when prices rise for a product in the CPI basket and the consumer responds by not buying that higher priced good and buys instead a lower cost substitute. There’s an actual increase in the price level for that original good that isn’t captured in the CPI because it isn’t purchased;

 

4) New goods and services that are created in the economy and their inflation are not captured because they may be not yet included in the 450 basket of goods and services of the CPI. Their prices and inflation are for certain part of the general price level rise, but aren’t reflected in the CPI. And remember, there are millions of goods and services not included in the CPI.

Add to these issues and problems, there is no adjustment for the value of the dollar falling, or for the fact the CPI measures only urban cost of living, or there is no segmentation that would show lower income households’ CPI are higher, the CPI excludes altogether certain important items that account for inflation: there’s no mortgage rates estimated in the CPI or rising income taxes. And many economists argue the CPI still significantly underestimates price increases for online shopping.

Summary

All the hype from Republicans and mainstream business media that the recent, and pending, fiscal stimulus spending is driving up inflation has no basis in fact.

It is an argument designed to be used to block and roll back the spending that would benefit households and consumption. The big business argument assumes the emerging inflation is a household DEMAND driven problem. On the contrary, rising prices are far more a business SUPPLY problem. Businesses are using the supply shortages as an excuse to boost prices, and to test how much the markets will allow, to generate and recoup 2020 losses and price cuts during the pandemic.

A detailed look at recent CPI numbers shows the biggest increases in prices are due to shortages in supply and those business sectors trying to recoup losses. Other businesses without losses in 2020 are going along and doing the same, using the rising prices as a cover to raise their prices as well.

The Biden fiscal spending is a small fraction of what the opponents claim. Only $800 billion will be spent in 2021 (and likely less as more workers leave unemployment benefits for jobs).

It’s not $6 trillion as the business media in particular likes to tout. $5 trillion of that claim is just talk of legislation that won’t hit the economy until 2022 or after, or not at all; and the remainder of the Biden American Rescue Plan of $1.8T is spread out over 10 years!

Finally, the CPI is not a solidly valid indicator of inflation and has a number of serious limits when it comes even to estimating the cost of living for US households. In general, moreover, it grossly under-estimates even the cost of living and is not a reflection of rising general prices and inflation.

Inflation will rise in 2021, for certain. But it will be more due to business practices and SUPPLY problems as well as other global conditions—and all that has little to do with consumer demand and government fiscal spending programs or legislation.

Nonetheless the US economic ideology machine, and its mainstream media conduit, will continue to pump out the fiction and myth that it’s government spending and excess US middle class and working class household demand that is the problem behind inflation.

May 12, 2021

Author Jack Rasmus is a Professor of Economics author of The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump," Clarity Press, January 2020. He blogs at jackrasmus.com and hosts the weekly radio show, Alternative Visions. His twitter handle is @drjackrasmus.

Are We At a "Sell on the Good News" US Stock Market?

We very well may be a a point in the stock market that we are seeing a "sell on the good news" juncture.

First of all, I do not believe we're at any MAJOR top, but our major US stock indices have had a significant "pre-earnings" run higher since late March and could be poised for a period of rest.

Here are the five biggest warning signs I'm seeing right now:

1) Stocks are Overbought

Overbought can remain overbought for lengthy periods, so this by itself would not make me particularly nervous. But it's definitely worth noting that the S&P 500's "relative strength" index ended this past week at or above average peaks over on a yearly basis.

We've been overbought like this (or more) several times over the past 5 years. All of the significant tops occurred with weekly readings at or below where we are now. Yet while we're clearly overbought and "could" see a top, there's definitely no guarantee, simply using this one indicator.

2) NASDAQ Failure at Resistance

After the bell on Wednesday, Apple (AAPL) and Facebook (FB) both reported blowout quarterly results, which led to a very strong NASDAQ open on Thursday. Sellers, however, haven't let up since that Thursday open.

3) Rising Volatility

The significance of rising stock prices accompanied by rising market volatility back is very relevant. On September 3rd of 2020, we saw another stock market top coinciding with rising market volatility. We're not quite where we were then, but we're getting close.

The S&P 500 and the volatility index ($VIX) usually move opposite one another, but when that changes, we need to be aware of it. 

The blue-dotted vertical lines illustrate significant tops that coincided with the SPX-VIX correlation readings in positive territory. This tells us that the market is getting nervous, while prices are rising - an odd combination. But it's also very important to realize that the SPX-$VIX correlation does not result in a top every time. So again, this is not a guarantee, but it is a warning.

4) Historical Performance

We can also look at the performance of the S&P 500 during the first half of yearly calendar quarters vs. the second half.

Since 1950, the S&P 500's annualized returns for the 2nd calendar quarter (April 1 - June 30), broken down by halves, are as follows:

  • April 1 - May 15: +14.48%
  • May 16 - June 30: +1.70%

We're two weeks away from turning the page to the second half of this calendar quarter (May 15). It's fairly obvious that our major indices tend to move higher throughout earnings season, but tend to struggle once the majority of earnings have been released.

5) Consumer Discretionary and Technology Sector Weakness

In the consumer discretionary sector, 76 companies in this sector have reported earnings. The consumer discretionary companies haven't faired well.

Only 33 of the 76 companies have move higher after reporting quarterly earnings, while 43 have moved lower. The 76 company daily average loss was -0.82%.

If you've sensed that many technology companies are struggling after releasing their earnings reports, you'd be correct. The average technology stock saw a -1.89% drop during the trading day immediately after earnings were released.

This compares to an average opening gain of +0.11%. Once that opening bell rings, however, technology stocks have been met by swarms of sellers.

That's a concern that I will be watching out for going forward, especially during the seasonally week summer months.

Rocky Boschert

Biden's Infrastructure Plan: A Costly But Essential American Expenditure

A Blueprint for Essential Investments in the Future

It is said that Eisenhower brought home the US Autobahn; that he foresaw the need for airports.

Back then we all understood that President Eisenhower, seeing these needs for infrastructure, brought America into the 20th Century. I say: “Thanks, Ike.”

Through the years, the US interstate gave everyone access to work, to recreation, to their Doctor, to the shopping mall, etc.; Today, for these same reasons and more, every household should have good access to the internet, and, have a few other good things.

The Big Old Deal

And even before Eisenhower, President Roosevelt’s New Deal (and its kin) employed the unemployed of the Great Depression to build a lot of infrastructure, much of which is still in use today, nearly one-hundred years later. The "New Deal infrastructure" included: safe clean water supplies, electricity, telephones, roads, schools, libraries, universities, parks, hydroelectric and irrigation dams, etc..

All of these things improved our quality of life. Imagine the 20th Century without them. Imagine today without them. Imagine life without recreation, recreation without those hiking trails. Our National Parks without conservation. Quality of life is important. Infrastructure improves our quality of life.

Imagine life without clean safe drinking water in our homes, our schools; without working sewers, electricity, postal service, and telephones. Unfortunately, for some of us, that is all too easy. Bringing these systems up to snuff would be a really good place for President Biden to start. These are some of the things that need to be done in order catch up, to maintain the status quo.

In the 20th we needed interstates and airports, waste water treatment, and drinking water treatment. These are still much a part of the way forward in this, the early 21st Century. Of late, and for some time now, nothing much has been done about most of these things. There are many roads and bridges that need to be repaired or replaced, water lines that need to be replaced, including upgrades to water and sewage treatment plants that need be mad.

Better that these repairs and upgrades be done simultaneous to the other needed improvements to housing, internet access, healthcare, and education.

As surely as interstate highways and airports led us forward in the mid-twentieth, research and development, education, communication, and digital healthcare will take us forward in the 21st Century and beyond.

In order to just stay even, we need to always be looking as far ahead as we can.

The Future

That was all part of America's past exceptionalism.

Today, we must at least explore President Biden's Infrastructure Plan to look forward to our infrastructural needs - to bring us into the 21st and beyond. And beyond those roads and runways of the 1950s, what is all else is to be included in this 21st century we call infrastructure? What are some of the infrastructural needs of today? Equally important, what will be those of tomorrow?

Climate Change

Forget the anti-science naysayers - or the oil industry lobby money corrupted politicians.

It is very important to understand and accept that Climate Change is real, and possibly the greatest, the most immediate threat, facing all humans today. If we do not arrest the increasing frequency of extreme global climate catastrophies, we will not be advancing as investors or as human being. Instead, our species will be fighting each other to survive. Again, if we are to thrive, to even survive, as a nation, as a species, we must directly address the effects of Climate Change that we know we have control over.

Fortunately, some money within Biden’s infrastructure plan does address the consequences of climate change. As such, we will need to avoid making costly mistakes such as building on what are to become flood plains; we will need to relocate away from these areas.

We will need new ways of storing drinking water, of treating drinking water, of treating sewage. We need to think anew our means for waste disposal and energy distribution.

We must systematically get off our dependence on fossil fuels. What will energy distribution look like in a non-fossil fuel world? What forms of energy will we be distributing, in what locales? We need to rapidly develop alternative sources of energy, better ways to store energy.

From the private automobile, to airlines, to mass transportation, to freight; we should be looking at new means of of powering transportation systems.

Antiquated Distribution and Transportation Systems

The Evergreen Lines’ newly freed "Ever-Given" was a 1300 ft long and carries 10,000 40ft, or 20,000 20ft, containers (the equivalent of 10,000 fully loaded 18 wheeler big rigs). At sea, her 80,000 HP diesel engine moves her along at almost 23 knot/hr. That’s one hell of a lot of CO2 being emitted into the atmostshere per hour. So is that being emitted by the 10,000 big rigs that brought and will take away all those on-board containers.

Relatedly, at what point did the chasing of cheap labor go too far? Do we really need to haul stuff half-way around the world? Why not build consumer goods closer to the point of consumption? Why aren’t we all more self sufficient in whatever way our available knowledge allows us to be?

To the extent we do continue shipping huge quantities of goods and materials across countries, around the world, we need new types of non-greenhouse gas emitting drive power for this transport. If we are to continue air travel at current and projected volumes, aircraft will need a different means of propulsion.

This means that R&D itself should be much a part of our infrastructure going forward. While significant progress is being made in replacing CO2 emitting internal combustion engines in automobiles, more needs to be done more quickly. Again, more R&D.

Pandemic Social Evolution

The COVID-19 pandemic has but accelerated an already rapid pace of change. Amazon has grown faster; retail has changed faster. Schools will never be the same. Healthcare will never be the same. Airline travel will never be the same.

Commuting to commercial work locations will never be the same. The valuation metrics of commercial real estate will never be the same. Mass transit will never again be as before. Global trade will never be the same.

So, what changes to infrastructure will be needed in a post-pandemic world?

Digital Productivity and Energy

Mark Benioff, the CEO and founder of Salesforce.com (CRM), says that his company "manufactures" software. Software doesn’t need an interstate carrier, an airliner, a container ship. Software manufacture requires trained and educated people to write it; needs a world wide web to distribute it, and trained and educated persons to employ it. Benioff says that because of the pandemic, today all 70,000 of Salesforce’s US employees are working from home.

Infrastructure for tomorrow needs include an adequate internet, education, education, and training. While we focus on Research and Development. Going forward, it is R&D that will lead the way, R&D will that provide solutions.

In order to effectively address the here and now, the future, our infrastructural needs, we as a nation, the world, must invest in 1) renewable energy, 2) science, 3) new transportation systems, 4) mobile and digital health care solutions, and 5) research and development in general.

 

How to invest in a world with increased climate-related disasters (January, 2021)

The United States has seen devastating wildfires ravage the Pacific Northwest (and Colorado more recently) as well as a record-breaking hurricane season in the Gulf of Mexico since July 21. It is clear climate change is responsible for the growing frequency of natural disasters, not to mention their increased power in terms of the damage and destruction they leave in their wake.

The International Monetary Fund’s latest World Economic Outlook states that the losses from unmitigated climate change on global "gross domestic product" (GDP) will average 15 per cent by 2100 (with a range of three per cent to 30 per cent). Likewise, the Network for Greening the Financial System (established by eight central banks following the signing of the Paris Agreement) indicates a reduction of 1.5 per cent to 23 per cent in global GDP.

Yet, at a time of record-high government debt levels, the ability of public fiscal policy to adequately respond to climate change impacts will be constrained. All of this is to say that private capital will play an enormous role in the world’s attempt to solve the problem.

The good news is that scientists still say there is time to avoid the worst-case projections, meaning that investors can stand to benefit from the long-term global shift to a non-fossil fuel, low-carbon economy.

Renewable Energy

The biggest investment opportunity will come in the form of renewable energy.

This is not a new idea for investors, but the scope of investment required for the world to meet its climate goals is massive. Total spending will have to reach an annual average of US$2 trillion by 2030 to reach the Paris Agreement targets (for reference, spending in 2018 was US$900 billion), according to the International Energy Agency (IEA). This shift is already happening, as market forces have taken over.

The economics behind building new fossil fuel power generation stations are not as attractive as they once were, especially for coal. Companies and utility providers specializing in solar, hydro, wind and geothermal technology will stand to benefit as a result (nuclear, though able to produce clean energy, appears to lack the political appetite now).

Solar power is in line to be the big winner: IMF research gives it the largest jobs multiplier, making it a logical first choice for politicians looking for bipartisan support regarding infrastructure spending.

The biggest concern surrounding renewables is the lack of “baseload” ability — for example, peak energy demands are not always when the sun is shining the most. For that reason, technologies supporting storage capacity also must grow.

Overall, the cost of renewable energy has come down dramatically and is now in-line, or cheaper, than fossil fuel alternatives. And that is before factoring in the externality costs (pollution, carbon dioxide) of fossil fuels.

Analysis done in 2015 revealed the global gap between the existing and efficient prices to be US$4.7 trillion in aggregate, or 6.3 per cent of GDP. The transition to renewables would accelerate even faster if fossil fuels weren’t currently benefiting from such massive direct and indirect subsidies from lobbly-money co-dependent governments.

Nonetheless, the world is moving towards a tipping point when it comes to renewable energy sources, and once we get there (if it hasn't arrived already), investors will want to have exposure to this secular bull market industry.

Electric Vehicles

Besides clean energy, the next opportunity comes in the form of electric vehicles.

Tesla’s story is well known among investors and is the biggest “pure-play” company on this theme, but all auto manufacturers are moving in this direction. Globally, the IEA estimates there are only eight million electric vehicles on the road but predicts that number will be 120 million by 2030 (potentially as high as 250 million depending on the scenario).

The COVID-19 pandemic shock may have revealed that the shift in consumer preferences is already underway.

From January to April 2020, it is estimated that traditional car sales plunged 15 per cent compared to 2019, yet sales of electric vehicles remained stable. A market that is forecasted to be nearly 20x larger in the next 10 years, and has relatively more inelastic demand, certainly warrants a further look from investors.

These are just two of the largest opportunities that come to mind when thinking about investing around the climate change theme.

Green Infrastructure

Other opportunities worth mentioning include rare earth metals (both the commodities directly and through mining companies), since demand will grow alongside the need for battery technology.

Plus, environmental consulting and engineering and construction services companies, will benefit from the changing infrastructure needs to a low-carbon economy; as well as carbon capture and storage technologies.

Geothermal 

Finally, a potential investment idea that is often overlooked is geothermal energy. This is not the first source that typically comes to mind when thinking of “green” alternatives, but it solves two key problems.

First, it addresses the issue of peak production versus peak demand. Power generation can be scaled to match any demand curve since the flow of heat from underground can be increased or decreased with relative ease.

Second, and perhaps more importantly from a political perspective, the expertise and resources that oil and gas companies have in drilling and maintaining oil wells can be put to use in the construction of these power plants (which require creating a network of reservoirs to cycle the heat above ground).

Geothermal plant construction is a natural solution for transitioning the workers who feel threatened by a move away from fossil fuels, making it an easier political decision for governments.

Renewable technology successes are tied to economic geography

It should be mentioned that betting on any one technology or solution may not be a prudent investment decision as it is too early to call a winner in many cases. Furthermore, given the early-stage nature for some technologies, investors with the ability and risk tolerance may consider looking at private companies - even though there is no shortage of public company options either.

Bottom line: As governments attempt to make up for lost time as the climate approaches the critical 2-C warming threshold that scientists have warned about, these trends will continue to grow.

As such, private capital will need to play a critical role in this global energy transformation, as informed electorates demand more and more action on climate change.

The economic recovery from the COVID-19 pandemic is an important opportunity for governments to accelerate investments, through green infrastructure spending and the like, wherever there is political appetite for stimulus.

Much like the industrial revolution, the coming decades will open several opportunities for investors to take advantage of shifts in global priorities and technological breakthroughs.

David Rosenberg, Founder, Rosenberg Research & Associates 

 

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