Today marks the 50th anniversary of Earth Day. Like everyone else, we at Earth Equity are celebrating and advocating from home.
Back in 1970, the first Earth Day had very little opposition – environmental issues were front and center and people from all walks of life agreed that a clean and safe environment was good for everyone. Eight years before, Rachel Carson had published Silent Spring. In 1969, the Cuyahoga River in Cleveland literally caught fire because of pollution. The EPA would not be founded until December of 1970. There was momentum to make positive change.
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Over the years, the agenda has shifted from cleaning up the environment to issues such as climate change and environmental justice. And, as that agenda shifted, opposition grew. We saw more money entering politics, advocating for polluting industries to continue polluting because it was “good for the economy.”
One of the most outspoken industries in opposition to climate action was the fossil fuel industry. Isn’t it ironic that the week of the 50th anniversary of Earth Day, the price of oil dropped into negative territory. What that means is that sellers were technically paying buyers to take oil off of their hands. The industry simply has nowhere to store the oil being pumped out of the ground and demand has dropped off because of the pandemic. Producers cannot simply shut off their wells – they continue to pump oil – and there’s nowhere to put it. Hence negative prices.
Earth Equity portfolios are fossil fuel free – what that means is that we do not invest in companies that produce, transport or process fossil fuels or burn them to produce electricity. The decision to exclude fossil fuels from our portfolios has benefitted our clients. According to Morningstar, XLE, the exchange traded fund which tracks the energy industry (fossil fuels), is down 44.89% year to date. Over the last 15 years, the annualized return is only 0.68% per year versus the S&P 500 which is 8.03% per year.* Besides the obvious environmental liabilities, why would anyone want to invest in this sector?
How are you spending Earth Day? Please write back to us and let us know. Maybe we’ll share your experience with everyone in an upcoming update.
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On to business…
The markets are about the same level that they were a week ago. There have been no changes to our investment models as we continue our capital preservation strategy. There continue to be too many unknowns, especially with the lack of nationwide testing. We simply do not know the extent of the pandemic in the United States.
I believe it is irresponsible for states to be opening businesses back up at this time. It appears that their rationale is less about science and more about an aversion to paying unemployment benefits. Opening the economy back up will only serve to extend the duration of the pandemic. It also adds a tremendous liability to the already stretched-thin health care system.
We’ll continue to monitor the situation closely and make changes that we deem necessary and in your best interests. We are assessing opportunities that are resulting from the market downturn such as biotechnology and beaten-down sectors. We have created a ‘Recovery Portfolio’ that can be used for select clients with an appetite for risk. Let your financial advisor know if you’re interested and they can provide more details.
Earth Equity will continue to work remotely until we deem it is safe to head back to the office. We will probably extend our time at home beyond any guidelines from government (state or federal). Our employees' health comes first and we do not want to put anybody at risk.
Until next time, enjoy your time at home together, be kind and grateful that 50 years ago, some enlightened individuals decided that it was time to give the earth a day.
Take care, be safe and healthy.
My Best,
Pete Krull
CEO & Director of Investments
Earth Equity Advisors, LLC
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