View this email in your browser

COVID and Climate Change

Could it be true that how we deal with one disaster is how we deal with all disasters? It’s looking more and more like it every day.
 
For years now, it’s been a struggle to get people to take environmental issues and climate change seriously. The typical response is that it’s a hoax, it’s a natural cycle or those scientists can’t be trusted. And year after year, the average global temperature rises, storms are increasing in intensity and sea levels are rising.
 
We initially saw the same thing in the United States regarding the coronavirus, downplaying its risk, distrusting the scientists and labeling it a hoax. Unfortunately, you can only deny the effects for so long until you realize that the scientists weren’t kidding. In fact, now the administration is saying that we may see 200,000 deaths as a result.
 
The excuse for inaction on climate change is very similar to the one we saw with COVID – “we don’t want to hurt the economy.” What is missed with this thinking is that without an adequate climate and clean environment and without healthy citizens, a booming economy is moot…and short-lived. It makes me think of this quote which is attributed to Native Americans that I’ve seen several times:

"When the last tree is cut down, the last fish eaten, and the last stream poisoned, you will realize that you cannot eat money."
Perhaps this pandemic will have a silver lining and shift the mindset back towards allowing science and compassion to lead. Back towards looking at our fellow citizens as friends and neighbors, instead of political rivals. Perhaps we can come together for the greater good, to address climate change aggressively, to make wellness a priority and to seek peace and cooperation. I believe that all of this can be done and still promote a sustainable economy through conscious capitalism. But we’ve got to both want it and work for it.

--------

On to business…
 
We continue to see some positive gains in the equity markets. Don't be fooled by this short-term movement. Every day in the US, COVID-19 cases are increasing as well as deaths. Because of the inability to get people tested, we simply do not know the extent of the infection across the country and it is this uncertainty that will ultimately keep equity prices depressed and markets volatile.  
 
I am beginning to have some concerns about corporate debt. Over the last several years, because of low interest rates, companies have loaded up on cheap debt, knowing that their cash flows could easily cover the costs. However, a slowdown of this magnitude was never envisioned. Goldman Sachs is expecting a 34% annualized decline in GDP with unemployment rising to as much as 15%. Because of this, we have reduced some of our exposure to corporate debt in our continuing effort to focus on capital preservation in our diversified mutual fund portfolios.
 
We have also increased some exposure to commodity futures. The virus-related work stoppages have likely reduced the production and supply of necessary commodities and we believe demand will pick up later in the year - positioning this asset class now could benefit portfolios positively. In addition, commodities are a non-correlated investment, meaning that they do not typically move in the same cycles as equity markets, further diversifying our portfolios and providing some more volatility cushioning.
 
Equity allocations have remained the same and will probably stay that way until we see compelling evidence that the infection rates are under control and things are returning to some semblance of normalcy.
 
Please continue to stay in touch with us, sending us your feedback on my weekly commentary. Also, feel free to share these letters with your friends and relatives – we’d love to help them if we can!
 
We are still working full-time from home, following the markets and world events, and answering your questions and concerns. We are all grateful for your business, trust and friendship. 

And, if you're looking for something to read while you're home, I publish a weekly list of articles that I'm reading and find interesting. If you aren't receiving it, you can subscribe here.
 
Please stay safe and healthy!

My Best,

Pete Krull
CEO & Director of Investments
Earth Equity Advisors, LLC
Twitter
Facebook
Website
Copyright © 2020 Earth Equity Advisors, LLC, All rights reserved.


Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.