Even TV commentators sense that the general election in Britain was a phony war, with neither party knowing how best to connect with the electorate. As the FT put it when describing the recent local elections: “These results show that the old divide of left versus right no longer explains how British voters think. Instead, globalist versus anti-globalist sentiment occupies voters’ minds, encapsulated by Brexit.”
Every so often the investment world changes. This happened in the 1950s as a consequence of economic lessons learned from the 1930s depression and the second world war. The business cycle was tamed by political action and that made companies safer – and with that came the cult of the equity.
So it proved to be the case for many investors, but not all. Those who ignored a changing world invested in traditional blue chips such as textiles, and the engineering support structure for those industries, shipping and shipbuilding. They saw their savings disappear as conservative managers failed to adjust to a more competitive age.
Never forget the competition
Now an equally significant change is on the way. Renewable energy is becoming more efficient and cheaper. President Trump has problems with coal miners not because of the Paris climate accord, but because US coal companies gave up human miners in favour of cheaper automated strip mining. Yet coal is still not competitive with cleaner and friendlier sources of energy, and the US solar industry alone already employs more than double the numbers of the mining industry.
Jeremy Grantham, founder of Boston asset manager GMO, and one of the wisest of market commentators, believes much of this change is obscured in countries where climate change is still contested. “I think it is happening much faster than most well-educated business people in America understand. Because the science is being deliberately obfuscated in the US, the consequences are being obscured as well.”
Smog-choked China has already designated renewable energies and electric cars as strategic industries. Conscious of this, the US military agrees with Grantham. The CNA Military Advisory Board – a Virginia-based think-tank – believes the US must take a leadership role in the transition to advanced energy by stepping up research and development of technologies such as renewables, nuclear power, energy efficiency and electricity storage.
It considers that this advanced energy revolution, which is driven by the plunging cost of renewable generation and battery storage, has major consequences for US defence.
Watch for a tipping point
The future can affect the present even if market penetration is low. In 2016, less than 1 per cent of all cars sold were electric, but today every major car manufacturer is putting the bulk of its research budget into electric cars to make them cheaper rather than improve the emissions of existing models.
Although wind, solar and other renewables now account for less than 0.5 per cent of world energy consumption, this type of energy accounted for more than half of the increase of world-wide energy generation last year – for the second year in succession.
It seems that the last 20 years have seen a complete change in the green energy business. Today, according to the FT and McKinsey Global Institute, it is much more focused, differently organised, and very much more efficient.