Living with the Long Descent – Part 2

The Eco Experts

“Robert, for starters, the unraveling of the global economy, a significant worldwide depression while regional economies get started up again, shortages of energy, food, and consumer goods, and wars in various corners of the planet, not all of them far from the industrial nations. Oh, and the collapse of at least a few democracies into autocracy. Hang on to your hat…”

John Michael Greer

Back in 2019, when I posted here on my nervousness about the coming peak in our industrial civilisation, I did wonder, at the back of my mind, that maybe, the LTG BAU modelling was wrong and we would carry on enjoying economic growth, prosperity and stability in global trade into the early 2020s.

I think we can now safely assume that the LTG BAU model is very much tracking real life back on planet earth.

For those that need a refresher on the current state of play, I strongly recommend reading John Greer’s recent blog post on the subject here. It covers, again, topics that I have been blogging about for years but in a succinct format. The very short summary is the reserves of cheap, economically viable and non-renewable fossil fuels critical to the functioning of our industrial civilisation is slowly running dry and we are now in the era of stagflation, economic contraction and the crumbling of the edifice of our elaborate industrial civilisation; that was built on absurdly cheap fossil fuels. Managing that long-term predicament will be the central fact for the rest of our lifetimes (and our children and grandchildren thereafter).

I have also covered on this blog, see here, the financial implications, risks and opportunities of where we are going and why the mainstream approach to investing is doomed longer term. The team at investing haven are a good source on the few niche opportunities in the market, principally lithium companies, clean energy/EV stocks and the graphite sector. Given most asset classes have fallen this year, in what most financial investors have agreed has been an incredibly challenging market conditions, this is an early sign of just how difficult it will be to actually generate a nominal, let alone a real (e.g. inflation adjusted) return this decade.

That doesn’t mean it’s impossible, just difficult. I will carry on blogging on the risks and opportunities from an investing space but for those with limited time, I strongly recommend signing up to the free investing haven newsletter that gives their high-level outlook on the markets.

It’s also important to differentiate what I consider short-to-medium term investing opportunities (e.g. green energy stocks, uranium etc) that will see a huge burst of public and private investment and the longer term macro/fundamental outlook on these technologies. For example, there is currently a renewed buzz around nuclear power and how it can get us out of the energy crisis we face with the very real risk of blackouts in Europe, Japan, China and even North America within a few years.

If nuclear was such a great technology and viable economically, we wouldn’t have such a small amount of energy derived by the atom in the 21st century. It’s extremely expensive, takes years, if not decades to open an atomic plant and issues around the radioactive waste have never been properly resolved. It does, once open, ensure base load power to the grid – something that is vital if you expand your reliance on solar and wind which are intermittent – and that is why it is back in the news. So, expect to see a surge of government subsidies into this sector this decade which should benefit, potentially spectacularly, beaten down uranium stocks.

Renewable energies and their related stocks are even more of a rollercoaster ride but during the euphoric cycles these clean energy related stocks can soar. Again, as this superb article in Financial Sense notes, there are huge problems with green energy and how it can be scaled up over this decade. Again, I do expect a big push this decade, but how far it goes before it hits the bottlenecks remains to be seen.

I agree with the thinkers Peter Zeihan and John Greer, that the energy most likely to be used up in the coming generation is King Coal. It is widely available across the world, is relatively economical to mine and has the advantage, unlike nuclear, of not needing highly skilled labour to keep it going. A few years ago, when the “experts” were talking on Bloomberg about fossil fuels being stranded assets and how oil demand had peaked, I expected ESG trend to abruptly switch to energy security as the main challenge, and at some point in the future, a “just do anything to keep the lights on” approach to energy.

In Europe we seem to be very close, if not already in, that latter panicky stage of policymaking. The reason we aren’t there yet is the energy literate crowd are still pinning their hope on nuclear saving us and so are not incredibly bullish about coal. Coal is a disaster for the environment but, given a choice between keeping the grid on and burning dirty coal, everyone will burn the coal (like us Europeans are already doing). So, I think that coal shares are probably a good long-term investment, particularly if markets crash in 2024.

My main message is do not rely on the politicians. They are, in general, energy clueless and so are many of the experts who advise them. If you are fortunate enough, you should invest personally and at a community level, on steps to reduce your reliance on the grid and the wider corporate supply chains.

There are a number of “buckets” involved in this. The first is reducing your energy expenses, so to speak. Insulate your home, delay turning the heating on in the winter, cycle more, drive less and other relatively easy wins to reduce your energy footprint.

A second strand is to take advantage of certain goods and services when they are still relatively economical and available. I have been on record before to predict that global tourism and the wider global airline industry will unlikely be around on a large scale beyond 2030. I don’t know if that prediction will pass or not but given the world has largely reopened after the Covid lockdowns (a reminder, after all, how the world could close down most tourism if we wanted to again), if you do wish to travel, in particularly to far flung destinations, it’s probably best to do it now when you still can.

Amazon will probably be spoken about in near mythical terms generations from now. People will talk about how once, when fossil fuels were plenty, that folks ordered stuff on a phone and it was delivered to your door within a few days. And you order nearly anything you wanted! So, take my advice and order whatever you think might be useful now, when you can, before it becomes either unavailable or too expensive. I have stockpiled lots of stuff that I know that I will need in the future years which is quite literally at a click of a button. As globalisation and the wider globalised supply chains unravel this decade, that luxury will fade away so better get whatever you need now when you still easily can.

There are more capital-intensive things you can do to prepare for the future, depending upon your situation and wealth. For those with homes, consider solar thermal (this provides hot water to your house via the sun), greenhouses (so you can grow your own food), investing in businesses that will do well in our new scarcity economy and reducing your energy footprint. If you have sufficient capital, consider buying local arable land that can be rented to farmers or to grow food yourself, something I would love to do if I had the means.

To summarise, even for those who can’t consider solar thermal or buying land, taking even small steps to reduce your energy consumption is a good start, whether that is driving less, insulating the house, wearing jumpers in the winter, cycling and walking more and growing a few lettuces and tomatoes in the summer months. Anything is better than nothing and will help you in the decades ahead.

Living with the Long Descent – Part 2