Behind the Markets Podcast: A Conversation with Doomberg

Doomberg is one of the most widely read financial substacks currently available. Some might be familiar with the below graphic of the Green Chicken.

Figure 1: Doomberg’s Green Chicken

On August 4, we were able to have a wide-ranging conversation about some of their most recent publications.

What Is Doomberg’s Current “Hottest Take”?

We started the conversation by asking Doomberg what, in their opinion, is their most controversial opinion published today. They answered clearly that they believe the evidence and the science tell them there is no realistic path to decarbonize the global economy fully through renewables. They indicated that they get to this conclusion from a physics perspective and that weather-dependent renewables (wind and solar primarily) will always be tough.

Their bottom-line point is that if societies are faced with the option of either changing their standard of living or burning fossil fuels for energy, they believe that when push comes to shove, fossil fuels will be burned.

Is Decarbonization Possible?

However, Doomberg made clear in the discussion that if the goal is decarbonization, this is absolutely possible. They believe that the primary path to get it done is through nuclear energy. It is their opinion that nuclear is associated with certain irrational fears and that the general population has lost faith in the technology. However, many countries are progressing their nuclear power assets. Doomberg cited that China is doing a lot of building, but if you were to ask what region they gave the most kudos on the nuclear topic, it was actually Ontario, Canada.

Doomberg told the story of how Ontario had been progressing down a certain path with a goal of decarbonization, but it ultimately did not work, and the citizens used their voting and election process to bring in a new government and set a new energy agenda. Ontario now has a very clean, very reliable and very economical grid, and they are getting this done through an application of nuclear power.

“Policy can stay inefficient longer than you can stay solvent.”

This was an interesting spin on the very familiar quotation from Lord John Maynard Keynes, “Markets can stay irrational longer than you can stay solvent.” Doomberg mentioned it while discussing their view on the Inflation Reduction Act (IRA).

As noted earlier, Doomberg does not believe a decarbonized future based solely on weather-reliant renewables, like wind and solar, is possible, but they believe that a lot of money is going to be thrown in that direction. Doomberg explained how they might seek to invest in such a scenario:

• Certain Things Will Be Promoted: Doomberg cited an example of lithium miners. It is obvious that if we are going to electrify many things, like vehicles, we need a lot more lithium. Money will be thrown in the direction of lithium miners. However, Doomberg says that timing will be important in such trades because technology’s advance could actually drive lithium’s price down and make it tough for these types of stocks to make money in the long run.

• Certain Things Will Help to Enable: It might be less risky, in Doomberg’s opinion, to focus on technologies that enable lithium miners to do the mining. This is similar to what many term a “picks and shovels” approach, where during the California Gold Rush, there was the concept of supplying the miners with tools being a lower-risk way to make a profit than actually depending on finding gold.

• Certain Technologies Will Be Contrarian: Some investors in various locations around the world might opt to invest in fossil fuel companies. This could seem contradictory—isn’t it the case that the world is trying to decarbonize? However, we saw in 2022 that when geopolitical tensions rose in the Russia/Ukraine conflict, natural gas and coal did, in fact, see sources of demand.

Gold, Bitcoin or Fiat?

Doomberg was very clear that we currently live in a fiat world, but they recognized some of the inherent benefits that gold and bitcoin can bring as compared to fiat currency. The focus of the discussion tended toward these hard assets having characteristics that could help in hedging an environment of monetary debasement, with a sensitivity to the history of government action—namely, when Canada basically outlawed bitcoin during certain recent protests or when the U.S. did, in fact, outlaw the holding of physical gold by private citizens. Doomberg stated multiple times that we ultimately live in a world where money is what the government says it is.

We would like to thank Doomberg for joining us on the show, and we note that the full episode can be listened to below: