Climate-Risk Adjusted Returns and the Weasel Coefficient
By Tom Konrad, Ph.D., CFA
An 80% Weasel Coefficient
Some activists, including a friend of mine, recently had a conversation with representatives of TIAA to try to persuade them to divest from fossil fuels. The conversation was mostly cordial, but predictably did not get anywhere.
One of the activists summed up the response from TIAA as “a non-response with a weasel coefficient of at least 80%.” Regarding the weasel coefficient, he also asked,
Can anyone explain to me what "our overarching strategy which targets climate-risk adjusted returns over the long-term” means in plain English?
Well, yes. Yes I can.
Climate Risk Adjusted Returns
When an investment...
When Market Calls are Wrong
Tom Konrad, Ph.D., CFA. My recent market call now looks premature. What lessons can we learn? When we make market predictions, we will inevitably be wrong some of the time. I stuck my neck out at the start of June, saying "We're near the peak." I later gave some numbers to allow readers to objectively judge if that call was right or wrong. I said that we should consider it an accurate call if the S&P 500 fell 20% (to 756) before it rose 5% (to 992.) The S&P 500 has not yet come near 756, but it closed...
The Trump Trade
by Garvin Jabusch The first two weeks under the Trump administration have been a shock to the system. With the change in administration, how will you approach your stock portfolio(s)? For starters, your fundamentals should remain unchanged. For me, that means looking for great companies in expanding markets that are enabling long-term economic growth, and reducing systemic risks. Of course, this also means buying these stocks at low valuations. Benjamin Graham and Warren Buffett were right about ‘wonderful companies at fair prices.’ That is never going to change. With that said, let’s look at what has changed and...
Cleantech Investing For EcoGeeks
by Tom Konrad. This story is cross-posted on EcoGeek.org As lovers of green gadgets, EcoGeeks probably know as much about what's new in clean technology (a.k.a Cleantech) as anyone on the web. So if you're an EcoGeek thinking about investing in companies which make the technology you know and love, you will probably take comfort in the old adage that you should invest in what you know. An EcoGeek investing in clean technology companies will have an advantage understanding how a company makes money, and what is a needed innovation with a large market, and what is simply a...
Green Energy Investing For Beginners, Part IV: Model Portfolio
Tom Konrad, CFA My target sector allocation for Green Energy Sectors: How much to put in Solar, Wind, Geothermal, Biomass, Biofuels, Energy Efficiency, Alternative Transport, and enabling technologies such as Smart Grid and Transmission. In Part I of this series on green energy investing (see also Part II and Part III), I suggested readers "structure your portfolio to reflect the technologies which are actually going to make a difference." This is not the same as investing in a market portfolio, because the market tends to overemphasize the most exciting or familiar (as opposed to the most useful) technologies. This...
An Elephant Hunter Explains Inflection Point Investing
John Petersen In "An Elephant Hunter Explains Market Dynamics" I discussed the two basic types of public companies; earnings-driven companies that are “bought” in top-tier weighing machine markets and event-driven companies that are “sold” in lower-tier voting machine markets. Today I'll get a bit more granular and show how "sold" companies usually fall into one of two discrete sub-classes that have a major impact on their stock market valuations. As a starting point, I'll ignore the China-based companies that are listed in the US because their quirky metrics would only confuse the analysis. Then I'll break...
A Quick Clean Energy Tracking Portfolio
Yesterday, I outlined a strategy to approximately replicate the performance of a Clean Energy mutual fund at much lower cost, with only a couple hours of effort. I gave a cost example based on $5000 invested in 5 stocks, with another $1000 worth of a single stock added in each subsequent year. This is the procedure I would use to select the initial five stocks. Collect all the top five or ten holdings of the available Clean Energy mutual funds. This data is available from Morningstar, and on fund sponsor's home pages. A few of these holdings may...
Buying Foreign Stocks: To ADR or Not To ADR
by Tom Konrad, Ph.D., CFA
Since my 10 Clean Energy Stocks for 2021 list contains 5 foreign stocks this year, a reader asked about the relative merits of buying a foreign stock compared to a US ADR. Here is a summary of the relative merits (for US investors) of buying a foreign stock directly compared to buying the American Depository Receipt (ADR).
First, let’s look at the tickers for the five foreign stocks in the list. There are four types of ticker in the list this year:
The stock on its home exchange in the local currency. These have the form...
How to Beat the Market: Less Money and More Judgement
Last week, I looked at how a small investor could gain an advantage in the market by understanding the other players. The most important other players are institutional investors such as hedge funds, pension funds, mutual funds, and investment banks who have considerably more resources and valuation skills than the individual investor, and so trying to take them on directly to beat them at their own is likely to be an expensive exercise in futility. Two Exploitable Weaknesses On the other hand, I argued that institutional investors have certain handicaps and biases which do allow small investors to enter...
Preparing for Catastrophe: Is your global warming portfolio ready for rising sea levels?
A Worse-Case Scenario I believe that a large part of global warming denial is fear: fear that if we acknowledge that global warming is happening, we will be morally obligated to do something about it, and that the problem is too large for us to do anything effective. I also believe that denying the problem is certain to render us all ineffective in dealing with it. But getting over our global warming denial is not the only obstacle in our way to dealing with it. Global warming is already happening, and future temperature rises are already inevitable given the...
An Investor’s Reaction to a Trump Victory
See my response here: https://www.greentechmedia.com/articles/read/how-one-clean-energy-investor-is-reacting-to-a-trump-victory Tom Konrad
Free Talk: A Permaculture Portfolio
For readers in the Hudson Valley, I will be giving a free talk next Monday night. I will speak about applying permaculture design principles to your investment strategy. While I developed my own strategy over the last two decades without any reference to these design principles, now that I'm familiar with them, I realize that I have been thinking along these lines for a long time. The design principles are remarkably robust and intuitive.
I used to think Permaculture was just about redesigning our food systems, but it's much much more than that.
The talk is sponsored by the Rondout Valley...
Trading Options and Foreign Stocks: When Low Trading Volume Is Not Illiquid
Tom Konrad, Ph.D., CFA
As usual, I am putting together my Ten Clean Energy Stocks for 2020 model portfolio for publication on January 1st or 2nd next year. As I wrote in November, expensive valuations for the US clean energy income stocks I specialize in mean that the 2020 model portfolio will contain more than the usual number of foreign stocks, and I am also planning on including a little hedging with options.
Why option strategies are now affordable
I have never included options in the model portfolio before because the commission structure did not make it cost effective for small investors...
Green Energy Investing For Beginners, Part II: How Much To Invest
Tom Konrad, CFA In Green Energy Investing for Beginners, Part I, gave information to guide the choice of green investment vehicles (mutual funds, ETFs, or stocks.) This article is intended to help investors decide how much of their money to put into those vehicles. An informed decision of how much to invest in green energy is at least as important as how you make the investment. The choice between green Exhange Traded Funds (ETFs) and green Mutual funds rests on a difference of about one percent per year, caused by differences in fees. Yet in the first three quarters...
Shorting The Least Green Companies
Newsweek recently released its 2009 Green Rankings for America's 500 largest corporations. Investors would do well to examine the bottom of the list, as well as the top. Tom Konrad, Ph.D., CFA I'm getting more and more company in worrying about a market peak. If you, like me, are Interested in green investing, and hedging your exposure to a market decline, you should probably also be interested in turning Newsweek's Green Rankings upside-down, and use some decidedly un-green companies as a hedge against the market risk of your greener portfolio. If you believe that...
Navigating the Clean and Bloody Streets of Europe
Tom Konrad CFA Blood In the Streets Walter Rothschild, 2nd Baron Rothschild Image via Wikipedia Baron Rothschild was an 18th century British nobleman who supposedly originated the phrase "Buy when there's blood in the streets, even if the blood is your own." Although accounts differ, Rothschild was a successful banker, and supposedly made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. True or not, the...
