Improper, Bloomberg, local weather change shouldn’t be the subsequent “black swan” for the markets – what’s the purpose?

From the climateREALISM

A recent article in Bloomberg titled “The Market’s Next Black Swan Is Climate Change”, by Mark Gongloff, states: “If we do not do more to slow global warming caused by greenhouse gas emissions, global equity valuations will fall by 40%.”

The article is full of false claims and unverifiable predictions. Here are the article's claims:

Climate change will have a very, very negative impact on stock prices.

Failure to slow global warming caused by greenhouse gas emissions will result in global stock prices falling by 40 percent, estimates a new study by the EDHEC-Risk Climate Impact Institute. If you factor in “tipping points” that accelerate climate change, such as the dieback of the Amazon rainforest or a major gas release from melting permafrost, market losses rise to 50 percent. If, on the other hand, the world pulls together and limits warming to 2 degrees Celsius above the pre-industrial average, stock prices will only fall by 5 to 10 percent.

First, what is a black swan event?

A black swan event is an unexpected, rare, and momentous event with high impact that is difficult to prepare for. The term comes from a Latin saying that assumed that black swans do not exist. The term was popularized by Nassim Nicholas Taleb, an economist, professor, and writer.

The article assumes that climate change is such an event.

The “really, really bad” part of the article is more of an emotional reaction from a stock trader than a true quantification. Of course, stock trading has been shown to be largely emotional from the start, as Investopedia reports:

• Trading psychology is the emotional component of an investor's decision-making process. It may explain why some decisions seem more rational than others.
• Trading psychology is primarily characterized by the influence of greed and fear.

With this in mind, it is easy to understand that the article and the study cited in it can easily be attributed to the fear component of stock trading.

And in the article, fear is used as a motivation:

And like objects in the rearview mirror, the damage caused by climate change is closer than it seems. Weather disasters cost the global economy $1.5 trillion in the 2010s, almost ten times more than in the 1970s when adjusted for inflation. The reinsurer Swiss Re expects insured losses from natural disasters to double in the next decade.

But this fear is based on climate model projections and not on actual data. If one were to look into the future using actual data and different metrics, one would expect less weather damage (not climate damage) in the future. For example, hurricanes. But the data shows no trend:

Or tornadoes: Not only is there no upward trend, the trend is even negative:

violent-tornados-1970-2020-F3_V2

The same goes for heat waves. In the past, they were much worse:

In fact, the number of deaths from extreme weather events, which are summarized in one key figure, has declined significantly over the last century.

While Bloomberg likes to blame the climate for extreme weather events, extreme weather events are just that: weather events. Such events are often confused with climate change, but that is a mistake. Weather and climate operate on completely different time scales.

Numerous real-world data sets show that there have been no more droughts, no more heat waves, no more floods, no more tropical cyclones and hurricanes, no more winter storms, no more thunderstorms, no more tornadoes, no more hail and lightning strikes, no more extreme winds from thunderstorms.

From an investor's perspective, it's all about money. The worst thing about extreme weather events is the destruction of property, but even the trend in property damage has declined as the earth has warmed slightly:

Investors often focus solely on the bottom line and ignore everything else. In this case, the bottom line is that there is no evidence that the future will be more dangerous, deadly, or destructive. The ability (or lack thereof) to predict the stock market is about as inaccurate as the results of computer models used to predict the climate.

“Predictions are difficult, especially about the future,” baseball player Yogi Berra is said to have said. The stock market proves this statement to be true every day.

Because climate change is not causing more extreme weather, it cannot ultimately lead to increasing corporate losses – which the data suggests is not the case. My advice to investors? Follow the data, not the money, and suggest to Bloomberg's Mark Gongloff that you take a “tranquilizer.”

Anthony Watts

Anthony Watts is a senior fellow for environment and climate at the Heartland Institute. Watts has been in the weather business on and off camera since 1978 as a television meteorologist and currently produces daily radio forecasts. He has developed weather graphics presentation systems for television and specialty weather instruments and has co-authored peer-reviewed articles on climate issues. He runs the world's most visited climate website, the award-winning wattsupwiththat.com.

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