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i am sympathetic to the argument what am i supposed to do the yields are so low but the market doesn't care that uh you don't have easy safe investments to make and your desperation is your own matter what it does is focus on the difference between short term and long term on the short term you can say i'm offered nothing by fixed income i get something out of stocks even though it's half what it seemed to be in the yield it's still better than nothing therefore i'll do it and the prices rise and that is a logic that you hear one way or the other all over the place and then there's the argument in the long term which is in the end all assets equal replacement cost house prices go up but if you can build one at half price you put a ceiling up if you can create a new company at half price i am a great fan of venture capital for this reason 60 percent of the grantham foundation the protection of the environment is already in relatively early stage bc and we are in the business of creating the new values from ground zero that we are not in the business of trading overpriced assets that have been bid up because people are desperate and that is a huge difference another difference by the way since i'm on the topic of bc is that american capitalism in particular has become a little fat and happy is how i like to describe it it's too monopolistic it has too much political influence it gets the laws of the land changed in its favor whether they're environmental attacks and they've simply learned to be less risky why start an exciting but risky new enterprise when you can buy your own stock so they do buy their own stuff and that burden of starting the new enterprises passes down the pipeline to venture capital and we have never seen more interesting opportunities venture capital not surprisingly has a higher return than the stock market because of the riskiness of each individual unit but this is the biggest loss of value in the history of the major groups of the s p that goes all the way back into the 20.
it's really been remarkable and yet you never knew when it was going to happen no one ever made a case that the next year or two would be such a bloodbath but you were on the wrong side of history if you owned the oil stocks now you can't it's too late now that the last miserable two and a half percent you can't get rich going short that even on the way down from 25 and 15.
what a good demonstration of the long term slow burning who knows what the time will be but you know in 10 or 15 years it will bite and that's what the rest of climate change looks like today you don't know how fast it will move you don't know when the us government will wake up and start being a leader once again but it will probably all happen and it will go in bursts and some of the time it will be much faster than you imagine but you will come back in 10 or 15 years and you will see that we have made an enormous transition to a green economy we will win technologically talked a little bit about the unique nature of the current economic downturn being virus driven and the extraordinary policy response of zero rates printing money unprecedented deficit spending how do you see this ending is this a happy ending or is it something that is going to mark history well i shouldn't pretend to be unbiased being agreed i'm not into politics but i am into greenery and that has dragged me really nearly into politics we will have deficit spending which will be great and a lot of that will be green which will be even better and very high return if the globe was to embark on a massive green stimulus program which it should it's necessary but if it doesn't it will give a shock to the economic system that may kick us out of the rather dreary slow declining growth rates of the last 20 years this has not been our finest age we have been carried on the broad back of china and india and so on but the developed world has been slowly but steadily losing its growth rate and one of the reasons is that after the financial crap we became too jittery about deficit spending which is i think a big mistake quite unnecessary as long as inflation is not really gathering state when you find yourself facing the slowing global economy you have to kick it in the tail it needs massive government stimulus on a sustained basis and what an opportunity to match that with the massive spending we need to green the economy you end up with no particulate matter which takes years off everybody's life and kills several million people a year in china from coal and so on and diesel what an opportunity to have a win win i've spent my entire life fighting the fed frankly and what i will say is this that typically the fed wins many more rounds than we do than we have but in the end we've had a knockout the in the end the fed has not been able to keep the tech bubble going indefinitely it sent it over the 21 times earnings of 1929 and send it up to 35 but it couldn't go on indefinitely even japan that went to 65 the price they paid when you finally knocked it out was here we are 31 years later not even faintly close to the high of 1989.
if you go into their real estate market which was an even bigger bubble i think the biggest bubble including the saxon bubble ever or tulips they went down for 30 years and now they're bottoming out maybe but they're bottoming out in central city prices at a quarter of where they came from the land under the empress palace in 1989-19 was indeed worth the state of california to give you some idea we spent a day or two checking it out it really was true and the price you pay for that is you could be 50 years later and still not back to that level again so don't fight the fed don't fight mother nature and when the two go head to head and what you just described gravity usually wins when you hit too high you're coming down doesn't matter if you're there yeah i would say don't fight the fed if you're a short-term player but if you're a long-term player you have to be prepared to fight the fed on occasions i'd like to give you an example of the difference between short-term and long-term and that is i've been a fanatic on climate change for 20 years but it was only in 07 that i first wrote a paper urging people to take it seriously and what has happened since then we could never say that the next quarter or the next year was going to be a troublesome for oil stocks which is if you will the anti-climate portfolio but when the smoke cleared oil as a percentage of the s p had come down from 25 in 1982 and 16 percent in her weight to two and a half percent yesterday if you have a diversified portfolio uh you have no more risk than the stock market but you have a higher return and the green bc part of it which is springing out of the woodwork is going to have a very high top-line growth rate of course electric cars are going to pound to death the growth rate of gasoline cars of course wind and solar is going to overwhelm gas electricity and storage is going to be epic and energy efficiency we are going to take tens of trillions of dollars to green our economy and we must do it and those opportunities unlike building walls along the palisades with fdr and creating handsome looking parks the green investments that we should be making have a high societal return and we are letting china get a running start on transmission on wind where they dominate on electricity where they dominate and even in electric cars they have 300 000 electric buses and the u.s has 400. what are we thinking
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