In today’s edition:
— El Nino is coming. Take a deep breath.
— Anthropic risk factors more than just runaway AI
— Move over, beavers. There’s a new climate hero in town.
— Staggering death toll from Europe’s summer heat waves
— Under the surface: Glaciers that end in lakes are melting faster around the world
High tides are nothing new to the San Francisco Bay Area, yet this week they are leading the local news as communities up and down the California coastline prepare for severe flooding. Having witnessed floodwaters that shut roads and even a main highway last winter, people are nervous this time.
The era of the higher waters is indeed here to stay, and it doesn’t take more than one local disaster for people to take notice. But panic is not the answer. Especially for investors. As November begins next week, all weather forecasts are calling for a “Super El Nino” this year. That’s the occasional weather pattern that heats up the oceans and causes more storms.
Depending on who you listen to, this year’s El Nino could be the worst in decades. Shipping routes could be impacted. Commodities prices hit by floods or drought. Infrastructure threatened by winds and torrential rains. Estimates of economic damage running into the tens of billions of dollars. It’s a headline writer’s dream.
But investors know better than to trade on shock headlines. When all is said and done, this year’s El Nino could indeed cause untold damage worldwide. But like climate change itself, actual local emergencies will be spread widely and intermittent. More snow in Colorado; maybe none in Canada. Typhoons in India, drought in Africa.
Smart investors will trade it as it comes, not as an approaching category 5 hurricane but as a global weather pattern with lots of threats and opportunities over several months. Higher commodities prices? Slowing supply lines for your new Apple Duo? Impact on the insurance industry? Catastrophe bonds? All potential trading windows but decisions to be made on trading preferences, not under threat.
When it is over, economists will look back and count the costs. They will be high. But for most of us, it will have little impact on our daily lives, and so should not impact our long-term investing strategies.
There are plenty of scarier things out there.
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If you have ideas or suggestions for us, contact me directly at dcallaway@callawayclimateinsights.com.
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