Blain’s Morning Porridge 2nd December 2021 – Outrageous Predictions for 2022 look more likely than usual.
“I’m sorry I ruined your lives and crammed 11 cookies into the VCR.”
In this morning’s Blain’s Virtual Advent Calendar please find this morning’s gift: a virtual set of snow tyres for a Fiat 500. I suspect this winter we might just need them… (Guess who’s wife loves her Roller-Skate version of the Italian Classic..)
This morning: Saxo’s Outrageous Predictions for 2022 include a rain check on ESG fundamentalism holding back fossil fuel investments necessary to enable energy transition to new reliable renewable sources. It’s one of these things that has to happen, or else energy instability will crush economies.
This morning I’m deliberately a little later than usual so I didn’t break the press embargo on the new Saxobank “Outrageous Predictions 2022.” It’s one of the highlight moments of Christmas each year. Saxo’s chief economist Steen Jakobsen and his team are not only entertaining, but challenging. This year’s thought-provoking predictions hit their usual high-level – outrageous enough to make you think just how likely they may actually prove to be.
But this year I think they have gone a little further. Their predictions still sound absolutely unlikely, but on a little reflection make absolute perfect sense, and are more likely than not to occur.
One of them hits very close to the reality – No 1: The Plan to End Fossil Fuels gets a Rain Check.
Steen and his team identify ESG (Environmental, Social and Governance investing) as a risk, a raising danger of creating an; “inability to get money and projects to mitigate fall-out from simplistic vision of future, weapons, taxation, disposable income, democracy…” Pretty strong stuff, and, as usual, they have nailed it.
The degree to which ESG has become an overly simplistic, but fundamentalist quasi-religious rule on how to invest is a theme I’ve repeatedly raised in in recent years. I am most definitely not a climate change sceptic, but the speed at which ESG and Sustainability Themes have shut down any-and-all fossil fuel investments is a massive concern.
ESG fundamentalism has created capital expenditure roadblocks in a global economy struggling with a massive shift in Energy provision. The result is likely to be chronic energy instability – with all the uncertainty that will create.
I wrote about it yesterday – how we are going to see the consequences of ill-conceived, poorly planned transition in the deepening energy crisis and chaotic gas prices in Europe this winter: Markets Judder as a Bleak Winter Begins
The reality is good corporate governance and companies that have clear socially beneficial policies are far better than those that brag about their Environmental credentials..
The Saxo team looked at how energy prices have historically led Capex spending – between 2001 and 2005 the Bloomberg Commodity Index almost doubled before Capex caught up. The current lag in energy capex is being compounded by the Green Transformation.
My argument is simple: the environmental Taliban have wrecked a clean sustainable transformation from a carbon towards a new sustainable renewable economy. I’ve argued we’re spending money on the wrong technologies, wind and solar (which are easy, but unreliable and inefficient), instead of the more difficult but reliable and high-density like tide, hydro and nuclear. Meanwhile, we’ve neglected the need to maintain energy stability by continuing to invest in the cleanest fossil fuel – gas. As a result, the path towards sustainable global energy looks increasingly tortuous.
Among the many mistaken assumptions adopted by the Climate Change fundamentalists are that energy demand will drop in a decarbonised economy – but the reality will remain rising populations in developing nations will demand higher standards of living, meaning growth and rising energy demand. The most likely way to successfully square that circle will be using Natural Gas as a bridge to a low-carbon future. Its already happening – but is in danger of being blocked.
It will take decades to properly transform the supply side of the global energy market – but it will have to happen gradually, not overnight.
I’d give the Saxo team 100% for correctly identifying the conundrum at the heart of the ESG investment problem – you want to do good by stopping fossil fuel investments, but to do so will cause devasting global consequences in terms of energy instability. However, that is not an outrageous prediction – its basic common sense!
The other Saxo outrageous predictions include:
No2 – Facebook faceplants on youth exodus
The number of younger users of Facebook declined 15% last year. It is expected to lose 45% of its audience in the next few years as the demographics age. The bulk of my Facebook feed is fluffy puppies (because our puppy is a Cockerpoo), sailing related posts, and 80% advertising rubbish targeted at me because of recent browsing history – which is why I’m getting hit with ads for stairlifts (because we recently sold the system from my mother’s house), garden centres, firepits and diesel generators (see yesterday’s porridge). It’s stuff targeted at me because of my specific browsing history – and Facebook makes windfall profits from it.. For the time being…
But my kids don’t go near Facebook. Why would they – its irrelevant and outdated. See my recent post about its name change to Meta: The Metaverse – much, much bigger than Facebook.
No3 – The US mid-term election brings a constitutional crisis
This one looks nailed on…
The rest include a number of thought-provoking ideas that are ripe with consequences. Take a look at the predictions on Outrageous Predictions.
No4 – US Inflation reaches 15% on Wage-Price Spiral
No5 – EU Superfund to be financed by pensions contributions
No6 – Women’s Reddit Army takes on Corporate Patriarchy
No7 – India joins Gulf Cooperation Council as a non-voting member
No8 – Spotify disrupted by NFT digital rights platform
No9 – New Hypersonic Tech drives new Space Race and Cold War
No10 – Medical breakthrough extends life expectancy 25 years
Out of time, and back to the day job…
Strategist, Shard Capital