8 ms·

Just as vast fortunes were made during the financial crisis of 2008 by selling the markets short ( see the film "The Big Short") I would expect there are people

Just as vast fortunes were made during the financial crisis of 2008 by selling the markets short ( see the film "The Big Short") I would expect there are people betting on climate change continuing down its current tragectory, and these people now have a vested interest in making this happen. I don't know how many other billionaires are putting their money on the pro climate change side but wouldn't a smart investor diversify their portfolio by betting on both the pro and con sides of climate change? I don't know what the form of such investments would take but can think of a simple one being investing in real estate northern regions where temperatures are currently too cold to support agriculture. Possibly an investment in water desalination plants would also see a gain from climate change. I'm sure there are many more better examples, my concern is that for every billionaire looking to save the world, there is another looking to make a buck off its collapse. So what happens when more of these profateers decide to use their vast fortunes to tip the scales further towards the collapse rather than salvation?

tw1010 8y ago
You're supposed to diversify your portfolio by betting on uncorrelated things. Betting both that something will go up and down is like placing money on both red and black, it doesn't make you any richer.
- sigmaprimus 8y ago
  Doesn't make you any poorer either, if your rich you want to protect your wealth. I believe it is called arbitrage. https://www.investopedia.com/terms/a/arbitrage.asp https://www.investopedia.com/terms/a/arbitrage.asp It doesn't seem intuitive but there it is.
  - joshu 8y ago
    Incorrect. Arbitrage is risklessly taking advantage of contemporaneous price differences by buying in one place and selling in another at the same time.
    - sigmaprimus 8y ago
      OK, but I still stand behind my premise. Bookies make money regardless by which team wins. Casinos show profits betting on red and black simultaneously because of the zeros. And it happens all the time in much more complex way in markets. Also the financial term I was thinking of I believe is called "Futures" and it is used to protect against large swings in currency values between countries. Inverters exploit this through arbitrage.
      - tw1010 8y ago
        I think this is wishful thinking. It'd be neat if there was incentive on both sides of the debate, to bet both against and for the idea that climate change will happen. Unfortunately that's not how it is: the real direction of the change in climate will be the most profitable option, and that's where investors will flood. And yeah, that might cause a self-fulfilling prophecy (incentivizing and accelerating climate change), but that's just how it is, that's where we are. Maybe we can try to spread false ideas like yours to make investors think it's good to invest on both sides, but I don't have much faith in its potency to make real impact.
        sigmaprimus 8y ago
        Could you clarify your statement? Are you of the opinion that the money is already invested on the side that climate change can not be stopped? Or the opposite?
      - buboard 8y ago
        Bookies and casinos are set up so thatvit is mathematically impossible not to win.
      - clairity 8y ago
        futures originated from commodities trading, where you wanted to lock in the price of a ton of corn or wool or whatever because you fear the price will go up. you don’t need them for currency arbitrage. you just need very fast connections to multiple currency markets, low transaction costs, and mispriced exchange rates. it’s riskless because the money itself is mispriced and you can buy it for one price (in your own currency) and sell it for another all in one transaction. you get the difference for free. that’s what makes it riskless and that’s what makes it arbitrage. keep reading those investopedia articles, it’s all in there somewhere!
- mikeash 8y ago
  Can’t you construct a bet that a price will either go up or down, but not remain steady? I believe that’s called a long straddle but I’m not super knowledgeable here.
  - clairity 8y ago
    yes, but that severely limits your upside, and it’s harder to thread the needle (in both timing and pricing).
    - ham_sandwich 8y ago
      In a straddle/strangle you have unlimited upside on both legs (up and down/call and put). It’s a matter of determining if the long gamma+long volatility position is worth the price you pay in option premium up front and decay thereafter (theta).
      - clairity 8y ago
        that's true, and a more complete explanation. i was taking the practical view that in most cases, the underlying options are reasonably priced and volatility is not highly unusual, so the practical upside is small at best. it's easy for the non-professional investor to lose money on these because you really need some extraodinary non-public information to exploit them.
buboard 8y ago
Even shorters need to make their gains from someone else. You are assuming that there are many people betting that climate change will not happen ? I think it’s safe to assume that climate change has been priced into the market.
- sigmaprimus 8y ago
  I'm sorry I must have misread the article we are all commenting on, I thought "investing prophet Jeremy Grantham" wast investing the majority of his wealth in trying to stop climate change, maybe I'll read the article again. From your comment I'm way off, or maybe you didn't read it?
- ham_sandwich 8y ago
  I often wonder how much climate change is priced in. If climate change is a given, wouldn’t we see it reflected e.g. in the implied vols of super long-dated options or real estate in Miami? VCs would be placing bets like crazy on solutions. Markets just don’t seem to be assimilating this info to me. Wonder if there have been any formal studies on this.
Pharmakon 8y ago
Logically speaking this amounts to betting that the Titanic will sink on its maiden voyage, while you’re stuck on the Titanic.
- holografix 8y ago
  No, it’s betting the titanic will sink while you know you’ll be dead before it starts sinking.
  - scarejunba 8y ago
    Haha, man, would that be a terrible way for the human race to go. Driven to extinction just because a few men really only cared about their own lifetimes. It would be highly amusing.

tw1010 8y ago

You're supposed to diversify your portfolio by betting on uncorrelated things. Betting both that something will go up and down is like placing money on both red and black, it doesn't make you any richer.

sigmaprimus 8y ago
Doesn't make you any poorer either, if your rich you want to protect your wealth. I believe it is called arbitrage. https://www.investopedia.com/terms/a/arbitrage.asp https://www.investopedia.com/terms/a/arbitrage.asp It doesn't seem intuitive but there it is.
- joshu 8y ago
  Incorrect. Arbitrage is risklessly taking advantage of contemporaneous price differences by buying in one place and selling in another at the same time.
  - sigmaprimus 8y ago
    OK, but I still stand behind my premise. Bookies make money regardless by which team wins. Casinos show profits betting on red and black simultaneously because of the zeros. And it happens all the time in much more complex way in markets. Also the financial term I was thinking of I believe is called "Futures" and it is used to protect against large swings in currency values between countries. Inverters exploit this through arbitrage.
    - tw1010 8y ago
      I think this is wishful thinking. It'd be neat if there was incentive on both sides of the debate, to bet both against and for the idea that climate change will happen. Unfortunately that's not how it is: the real direction of the change in climate will be the most profitable option, and that's where investors will flood. And yeah, that might cause a self-fulfilling prophecy (incentivizing and accelerating climate change), but that's just how it is, that's where we are. Maybe we can try to spread false ideas like yours to make investors think it's good to invest on both sides, but I don't have much faith in its potency to make real impact.
      - sigmaprimus 8y ago
        Could you clarify your statement? Are you of the opinion that the money is already invested on the side that climate change can not be stopped? Or the opposite?
    - buboard 8y ago
      Bookies and casinos are set up so thatvit is mathematically impossible not to win.
    - clairity 8y ago
      futures originated from commodities trading, where you wanted to lock in the price of a ton of corn or wool or whatever because you fear the price will go up. you don’t need them for currency arbitrage. you just need very fast connections to multiple currency markets, low transaction costs, and mispriced exchange rates. it’s riskless because the money itself is mispriced and you can buy it for one price (in your own currency) and sell it for another all in one transaction. you get the difference for free. that’s what makes it riskless and that’s what makes it arbitrage. keep reading those investopedia articles, it’s all in there somewhere!
mikeash 8y ago
Can’t you construct a bet that a price will either go up or down, but not remain steady? I believe that’s called a long straddle but I’m not super knowledgeable here.
- clairity 8y ago
  yes, but that severely limits your upside, and it’s harder to thread the needle (in both timing and pricing).
  - ham_sandwich 8y ago
    In a straddle/strangle you have unlimited upside on both legs (up and down/call and put). It’s a matter of determining if the long gamma+long volatility position is worth the price you pay in option premium up front and decay thereafter (theta).
    - clairity 8y ago
      that's true, and a more complete explanation. i was taking the practical view that in most cases, the underlying options are reasonably priced and volatility is not highly unusual, so the practical upside is small at best. it's easy for the non-professional investor to lose money on these because you really need some extraodinary non-public information to exploit them.

buboard 8y ago

Even shorters need to make their gains from someone else. You are assuming that there are many people betting that climate change will not happen ? I think it’s safe to assume that climate change has been priced into the market.

sigmaprimus 8y ago
I'm sorry I must have misread the article we are all commenting on, I thought "investing prophet Jeremy Grantham" wast investing the majority of his wealth in trying to stop climate change, maybe I'll read the article again. From your comment I'm way off, or maybe you didn't read it?
ham_sandwich 8y ago
I often wonder how much climate change is priced in. If climate change is a given, wouldn’t we see it reflected e.g. in the implied vols of super long-dated options or real estate in Miami? VCs would be placing bets like crazy on solutions. Markets just don’t seem to be assimilating this info to me. Wonder if there have been any formal studies on this.

Pharmakon 8y ago

Logically speaking this amounts to betting that the Titanic will sink on its maiden voyage, while you’re stuck on the Titanic.

holografix 8y ago
No, it’s betting the titanic will sink while you know you’ll be dead before it starts sinking.
- scarejunba 8y ago
  Haha, man, would that be a terrible way for the human race to go. Driven to extinction just because a few men really only cared about their own lifetimes. It would be highly amusing.