Warren Buffett’s green bet

The ongoing climate debate is surely wearing some of us down as well as burning some actually homes down. The cost to small business for some may prove a deal breaker with electricity costs predicted to increase some 36%. But how then do we turn all of this into an investment opportunity?

Conflicting sermons

While the consensus on climate change is there for the large part, conflicting research from some scientists means the jury is still out for many people, (including most of the brains trust of the Liberal cabinet).

But regardless of pollution causes climate change it is still a cost to society and someone needs to wear that cost.

Should carbon dioxide be formally banned? Is Kevin going to tax every breath I take? (Apologies to Sting) I don’t know and I’m not sure about you, but the whole political skulduggery is wearing me down. So weather (pun intended) it does cause climate change or not let’s just get on with it.

Owing to when the price is set and the market starts to work, there should be some great investment opportunities whenever uncertainty exists and there are more sellers than buyers. (As occurred in the EU trading market)

The price of carbon in the EU dropped substantially after listing, allowing intelligent investors to move in. They bought carbon credits after they became significantly undervalued, mainly because governments got the ‘balance’ wrong by over-subsidising polluters. Uncertainty is an intelligent adviser and investors best friend.

The ‘smart money’ investments by the super investor Billionaire’s

Warren Buffett can see the writing on the wall with his move to buy into Burlington Northern. His timing is characteristic of the super investor’s psyche.

The stock market has gone up roughly 60% since 9 March last year – in roughly the same time the price of oil has risen from a low of $30.81 US a barrel December 2008 to break above $80 per barrel in October 2009, better than close to a 160% return in 10 months. By far and away the best return of ANY investment category so far.

Running the numbers, Buffett has worked out that the per-unit cost of rail freight will soon trounce the per-unit cost of road transport with the rising price of oil and freight behaviour will soon switch to cheaper alternatives. Bingo! This may take time, but that won’t worry him.

Green with envy

The other big investment area is the opposite end of the carbon pollution emitting scale, green energy. Almost any investment mandated by a government is like an invisible patent to the intelligent investor.

We might we head into a period of uncertainty but in the right hands it’s a manageable one. Now is not the time to miss out on finding the right investment opportunities by following the herd.

Nick Christian is a Financial Adviser and planner and authorised representative of Millennium3 Financial Services.

The views and opinions expressed within this letter are those of the author and do not necessarily reflect those of Millennium3 Financial Services Pty Ltd.

The above is general in nature and should not be acted upon without seeking the advice of a professional licensed financial planner.