THE PIG LOVES DON COXE

December 4, 2009

A climate skeptic's guide to fun and profit

By Derek DeCloet
The Globe and Mail

Donald Coxe pitches the most outrageous, politically incorrect investment idea of all: How to profit from global cooling

Last Monday, a dozen or so environmentalists went to Chicago's financial district, wandered into one of its busiest intersections, laid down, and locked arms. Their purpose in forcing a couple of hours of gridlock, and causing cars to spew extra carbon emissions, was to complain about U.S. policy on carbon emissions.
It is the kind of scene that bemuses Donald Coxe. Not so long ago, he was one of Bay Street's best-known investment strategists, famous for his strong convictions, his right-of-Reagan political leanings and his Conrad-Black-esque vocabulary (how many financial pros can use "Rhadamanthine" in a sentence?). Oh, and for making people money, too.
Today, he operates in a somewhat dimmer spotlight, thinking and writing about the world from a perch in the very building outside of which those protesters caused that traffic jam. But he still has an audience - most notably at Bank of Montreal, his former employer, which still pays for and distributes his research - and still knows how to capture attention.
So as the world's policy makers converge on Copenhagen to talk about the warming planet, Mr. Coxe continues to pitch the most outrageous, politically incorrect investment idea of all:
How to profit from global cooling.
In the genteel world of Canadian finance, there are certain things you simply don't do. Questioning the global warming consensus is one of them. Banks don't set up global-cooling-themed mutual funds. Their CEOs don't give speeches casting doubt on the science of a warming planet. Instead, they keep any skepticism to themselves and make nice. (BMO, for example, has a policy to be "carbon-neutral" and backs it up by funding things like reforestation projects in British Columbia.)
Mr. Coxe is one of the few people connected to a big bank who goes against that grain. He might even be Bay Street's most forceful climate-change skeptic. The Earth isn't warming, it's cooling, he says. The green movement? A joke. Coal? Fuel of the future. Al Gore? A money-hungry opportunist.
The oil sands? The number of ducks killed in Fort McMurray tailings ponds "is what a few hunting parties would collectively bag on a good weekend."
So there.
My purpose here is not to weigh in on Mr. Coxe's theory of climate change (which mostly has to do with sunspots) or those of the scientists who disagree with him. But he is worth listening to in this respect: The big money is always, always made by those willing to bet against a deeply held consensus. So if, five or 10 years from now, new evidence has thrown theories of global warming into doubt, enormous profits will be made by those putting their cash on that outcome now.
Where? Suncor Energy and Canadian Oil Sands are obvious ones. "The biggest single problem for the valuation of the oil sands stocks is this global jihad against them for what they're doing for global warming," says Mr. Coxe. "As soon as that's called into question, I can tell you that there's going to be a ton of money coming back into those stocks."
But that's not even his favourite idea. Agricultural stocks are. Cooler weather equals smaller crops equals food shortages. "I regard that as the single most important investment concept - to be investing in the companies that, one way or the other, can make a huge difference on global food supplies. ... Those companies, I believe, could become among the most valuable companies on Earth." Think Monsanto or farm-equipment suppliers like Deere.
What else? Offshore oil drillers. Coal or maybe the railways that haul it. Warren Buffett will make 10 times his money on his takeover of Burlington Northern if there's global cooling, he says.
And if Al Gore is right? If the push to limit carbon emissions gains momentum, and the Copenhagen gabfest actually produces something of substance, and Canada is forced to counteract a reputation as the world's dealer of dirty oil? Then Don Coxe's audience is going to get smaller and his wallet a lot thinner. Count me skeptical of that outcome, though.