Saturday, January 18, 2014

How useful will your stock portfolio be when the ice age comes?

Daily Mail - scientists warn a mini-ice age is on the way. Er! Mah! Gerd! Just read the bullet points:

  • 2013 was due to be year of the 'solar maximum'
  • Researchers say solar activity is at a fraction of what they expect
  • Conditions 'very similar' a time in 1645 when a mini ice age hit

The solar maximum that was expected in 2013 didn't come. Instead, it looks like the sun is going to sleep.

'Whatever measure you use, solar peaks are coming down,' Richard Harrison of the Rutherford Appleton Laboratory in Oxfordshire told the BBC.

'I've been a solar physicist for 30 years, and I've never seen anything like this.'

He says the phenomenon could lead to colder winters similar to those during the Maunder Minimum.

'There were cold winters, almost a mini ice age.

'You had a period when the River Thames froze.'

Er! Mah! Gerd!

Now, you guys all know I don't like to be an alarmist about these things, especially if they don't involve killer robots. Or aliens. I just wanted to put this story out there so that y'all can think for a bit about your investment portfolios.

After all, what would happen if we suddenly entered a "little ice age"? Do you think US equities would perform well, with food prices skyrocketing and US agriculture mostly shut down for a couple years? What if most of the world's other major food-producing regions, like Canada and the Ukraine, were in the grip of winter for a full year?

Do you think your government bonds will do well?

What about cash? Will you be safe holding JPY, EUR and USD?

Wow, all of a sudden a bunch of your asset classes lose their value. All at the same time. Highly correlated-like.

Gee. If only there was some sort of - oh I dunno - a yellow metal or something that would retain its value; something to keep your port from plummeting to $0.01 as the weather threw down the world economy and smote its ruin upon the mountainside!

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